MEES Reform and the Evolving Office Market

Taken together, these developments point to an office market in which energy performance, flexibility and building quality are becoming central to asset value, occupational cost and leasing strategy.

What has the government announced?

In its June 2026 interim response, the government confirmed a revised timetable for tightening MEES in the commercial sector:

• Private rented buildings over 1,000 sq m will be required to achieve EPC B by 2031.
• No changes are proposed for smaller properties for now.
• The proposed interim milestone of EPC C by 2027 has been dropped.
• Existing flexibility mechanisms, including exemptions and the seven-year payback test, remain.
• Changes will only take effect once secondary legislation is enacted.

While the timetable has softened, the policy direction is clear:

• Higher standards are coming, particularly for larger assets.
• Energy efficiency is now a structural regulatory issue, not a short-term compliance exercise.

What does this mean in practice?

For landlords

The removal of the 2027 milestone eases immediate pressure. However:

• Capex planning will be critical, as older stock may require significant upgrades to reach EPC B.
• The risk of stranded assets will increase where improvements are not cost effective and so not required by MEES, leaving landlords to consider whether they may become harder to let or require a change of use or deep refurbishment.
• Value divergence is likely to widen, with high-performing assets commanding stronger rents and liquidity while secondary stock faces increasing pressure from obsolescence.
• Pre-2022 EPC ratings may carry hidden risk because the calculation methodology changed in 2022 and now favours electrically heated buildings, reflecting the decarbonisation of grid-supplied electricity in the UK. This reverses the previous position and may mean that some gas-heated buildings see their EPC ratings fall when reassessed. Conversely, some electrically heated buildings may see ratings improve without physical improvement works being carried out.

For occupiers

• Energy costs will become a core occupational issue, with the government estimating annual savings of up to £360m across large, more efficient buildings.
• As landlords upgrade or withdraw stock, occupiers may face less availability of lower-quality space and a tighter market for best-in-class buildings.
• Where buildings require works, occupiers may be in a better position to negotiate rent concessions, seek green lease provisions or influence upgrade strategies.

Insight from the Office Occupiers Survey

Irwin Mitchell’s 2026 Office Occupiers Survey points to a shift in occupier behaviour that aligns with the direction of regulation: occupiers are using space more efficiently, prioritising quality and placing greater weight on sustainability and flexibility.

• Occupiers are making better use of existing space, rather than simply increasing their footprints. Reconfiguration and efficiency are now dominant strategies, meaning that energy efficiency upgrades can align with broader workplace optimisation.
• Demand is focused on high-quality, future-ready buildings, with lower-quality stock becoming harder to let without investment. The increased MEES requirements will accelerate this polarisation.
• Sustainability is now embedded across building selection, design and operational decision-making. Regulatory compliance with MEES is therefore only the baseline, with occupiers increasingly expecting more.
• Occupiers want flexible, adaptable lease structures featuring opportunities for stronger landlord–occupier collaboration. As a result, MEES compliance will increasingly be addressed through shared investment approaches, green lease clauses and ongoing building performance monitoring.

Key actions

For landlords

• Undertake a portfolio-wide EPC review and gap analysis.
• Prioritise assets most exposed to the 2031 requirements, taking into account the age of the current EPC rating.
• Build phased capex strategies.
• Consider lease structures that enable recovery of improvement costs.

For occupiers

• Factor energy performance into location decisions.
• Assess total occupational cost: rent plus energy.
• Use lease events to seek improvements or concessions.
• Align workplace strategy with ESG and efficiency goals.

Conclusion

The latest MEES announcement gives the market more time, but it does not change the direction of travel. Energy efficiency is now a core driver of value, risk and occupational cost in the office sector.

At the same time, occupier behaviour is shifting towards quality over quantity, embedding ESG considerations and demanding flexibility and performance from space.

At Irwin Mitchell, we have the expertise and insight to help businesses, whether investors or occupiers, navigate this changing landscape. Please get in touch to discuss what these changes may mean for your business.