In the always-changing world of commercial real estate, a clear trend is emerging. Occupiers increasingly favour high-quality, sustainable office environments. Companies are showing a significant shift towards Grade A office space, not only for prestige and amenities but because older buildings frequently fail to meet modern BREEAM (building research establishment environmental assessment method) standards. As sustainability, energy efficiency and ESG commitments become central to corporate strategies, the demand for greener offices is reinforcing a flight to quality that leaves ageing stock behind. Keep reading to learn more.
The ESG Imperative Driving Office Choices
Environmental, social and governance (ESG) concerns are no longer peripheral. Many firms now include sustainability credentials in their selection criteria when leasing office space. This surge is not merely about optics. High-certified buildings tend to attract higher-quality tenants, command rental premiums, and enjoy faster leasing rates. Meanwhile, investors increasingly prioritise minimum environmental certifications in their investment strategies.
Structural Challenges: Why Old Offices Are Struggling
A key obstacle for many legacy office buildings is their energy performance and environmental rating. Much of the UK’s existing office stock was built decades ago, and many older buildings simply were not designed with today’s sustainability benchmarks in mind. Approximately 55% of UK office inventory by floorspace is more than 30 years old, and nearly a quarter was constructed before 1950.
These aging properties often lack BREEAM certification or have low EPC (energy performance certificate) ratings. Without intervention, a substantial proportion of this office stock may become increasingly unattractive to occupiers with ESG mandates. For some of these older buildings, assessments reveal they are unclassified, placing them in the bottom quartile of environmental performance nationally.
Regulatory and Financial Pressures
Regulations are amplifying the problem. The UK government has announced reforms to the energy performance of buildings regime, with proposals pushing a minimum EPC rating of B by 2030 for commercial properties. Non-compliance could leave many older offices functionally obsolete, triggering either significant retrofits or repurposing.
Refurbishing for sustainability, however, is not cheap. Many buildings require substantial work to achieve BREEAM refurbishment credentials. Retrofitting deep energy improvements, installing low-carbon HVAC systems, and upgrading building fabric to reduce operational carbon can strain budgets. In some cases, landlords conclude that the cost of upgrading may not be justified by the longer lease terms or rental uplift.
Yet, the business case for sustainability is compelling. Buildings rated BREEAM “outstanding” achieve void rates significantly lower than lower-certified peers. This suggests that tenants are more willing to commit to well-performing, sustainable space.
The Flight to Quality Intensifies
These forces combined are driving what many in the industry call a flight to quality. Corporate occupiers are gravitating towards Grade A, BREEAM-certified buildings, willing to pay a premium for sustainability, efficiency and future-proofing.
ESG credentials are no longer a “nice to have”. They are becoming a baseline requirement for many companies. Meanwhile, supply of truly green, high-spec Grade A stock is still limited, particularly in established urban centres, creating a supply-demand mismatch that further fuels the trend.
Landlords with older, uncertified buildings face a dilemma. Without upgrades, they risk being sidelined. Nearly 20% of UK office space may become unlettable to a majority of occupiers unless significant investment is made.
Office Refit, Retrofit and Repositioning Strategies
To meet demand, many landlords are opting to refurbish and retrofit. Projects are being undertaken to bring older buildings up to BREEAM refurbishment and fit-out standards.
These retrofits often prioritise:
- Improving energy efficiency through upgraded insulation, glazing and HVAC systems
- Embedding low-carbon design principles such as renewable energy, metering and energy monitoring
- Enhancing occupant wellbeing with better daylight, air quality and amenities
- Minimising embodied carbon by reusing structural elements whenever possible
This wave of refurbishment is not just a reaction to regulation. It is also a strategic move to maintain relevance in a market where higher demand for Grade A office space as older buildings can’t meet BREEAM standards.
Implications for Investors, Developers and Occupiers
- Investors are increasingly weighing environmental performance in their asset allocation decisions. Buildings with weak sustainability credentials may face lower valuations, higher vacancy risk, or become stranded assets.
- Developers must balance retrofit costs with tenant expectations. While upgrading an existing building can be capital-intensive, success may yield stronger leasing velocity and long-term tenancy. The performance benefit often comes more from faster leasing than from dramatic rent uplifts.
- Occupiers benefit in multiple ways: reduced energy costs, alignment with ESG/reputation goals and healthier, more efficient working environments. For many, signing leases in BREEAM or EPC-certified buildings is a clear way to reduce operational emissions and show commitment to sustainability.
Risks and Challenges
Despite these shifts, the transition is not without risk:
- Retrofit Costs: Upgrading old buildings to high BREEAM standards can be expensive, especially for deep energy retrofits.
- Regulatory Uncertainty: While EPC and BREEAM requirements are tightening, timelines and enforcement can shift, leaving some landlords in a waiting game.
- Tenant Willingness: Not all occupiers have ESG policies or budgets to pay for premium sustainable space. Smaller firms may prioritise rent or location.
- Embodied Carbon Trade-Offs: A complete demolition and rebuild may yield the best operational performance, but it incurs high embodied carbon. Repurposing existing stock is often more sustainable.
- Market Saturation: As more high-spec Grade A sustainable offices come online, supply could catch up with demand, potentially compressing premiums.
The Road Ahead
The structural shift is clear. Older, inefficient offices are being left behind unless upgraded, while sustainable, high-performance buildings are increasingly commanding market attention and capital. The rise in demand for Grade A offices is not just about modern design or prestige. It reflects a deeper alignment with ESG goals, regulatory requirements and long-term operational efficiency.
Landlords who act now by retrofitting, upgrading or responsibly divesting stand to capitalise on this trend. Developers and occupiers who prioritise sustainability are likely to benefit in terms of reputation, cost savings and resilience. While challenges remain, the momentum suggests that the demand for top-tier, low-carbon office space is not a passing fad but the new standard in commercial real estate.
