UK commercial property continues to serve as a long-term, income-oriented option for many investors. However, the risks shaping property resilience are evolving, and environmental and social considerations are now part of the investment landscape, albeit not uniformly across the market. Environmental performance in particular can be a differentiator where regulation, tenant expectations and future capital requirements combine.
The most visible pressure relates to energy efficiency. Buildings with weaker Energy Performance Certificate (EPC) ratings may require substantial investment over time, both to remain compliant and to meet evolving occupier standards. For owners, this introduces an additional financial consideration, as older assets may face rising capital expenditure demands simply to stay competitive. In some cases, this can weigh on long-term income returns and valuation assumptions.
However, investors should be cautious about assuming these effects apply equally across all sectors. The office market is where sustainability credentials are currently most visible. Larger tenants increasingly factor building efficiency and environmental standards into leasing decisions, partly driven by corporate reporting and climate commitments. In other subsectors, the picture is more mixed. In industrial and logistics property, major occupiers may prioritise sustainability requirements, but smaller tenants seeking functional space are often less focused on EPC ratings or long-term environmental performance. Retail property provides another example, where tenant priorities remain dominated by affordability, location and trading fundamentals.
Sustainability is not replacing the traditional drivers of property performance, but it can add an additional layer of differentiation in some markets more than others. Even where tenant interest is inconsistent, the regulatory direction of travel is clearer. Inefficient building stock is unlikely to remain cost-free to hold indefinitely.
Retrofitting can be expensive, disruptive and uncertain in terms of payback. For investors, this reinforces the need to view property as an asset class requiring ongoing stewardship rather than passive rent collection. Property values may not shift dramatically in the short term, but some assets may gradually become less attractive or more capital-intensive to maintain.
Beyond energy standards, physical climate exposure is also becoming more prominent. Recent flooding across parts of the UK has underlined that environmental risk is not theoretical. Over time, climate-related events may affect insurance cost and availability, disruption risk for tenants and valuation assumptions in higher-risk areas.
For some investors, sustainability considerations may not be limited to buildings themselves. Scrutiny of tenant activity and sector exposure can also play a role, particularly where occupiers operate in industries facing long-term regulatory or reputational pressure. While sometimes framed as an ethical concern, this can also be viewed as a pragmatic question of tenant quality, reputational alignment and income durability.
For investors holding property directly, these challenges sit with their own balance sheet and governance framework. Managing refurbishment decisions, tenant pressures and physical risk exposure generally requires specialist capacity. For those investing through professionally managed pooled property funds, these issues can be addressed through the diversification, asset management expertise and long-term planning that well-run funds should provide.
As UK commercial property continues to adjust, investors should expect sustainability considerations to play a growing but uneven role in distinguishing more resilient assets from weaker ones.
For more information on Arlingclose’s investment and ESG advisory services, please contact the team.
05/02/2026
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