UK warehousing: Energy efficiency crisis and compliance

A recent article in Motor Transport drew attention to a significant regulatory challenge facing the UK warehousing and logistics sector.

Energy efficiency requirements are tightening, the clock is ticking, and the consequences of inaction could be severe. Yet for many occupiers, the full picture – including what it means for their leases, their operations, and their bottom line – remains poorly understood.

This article sets out where the law stands today, what is coming, and – critically – what occupiers should be doing right now.

Where the law stands today

Under current law in England and Wales, non-domestic landlords are required to hold a valid energy performance certificate (EPC) for any property they let, and that property must achieve a minimum rating of "E". This obligation applies across all privately rented non-domestic properties, regardless of whether the tenancy has changed hands.

Where a property falls below the "E" threshold, cost-effective energy efficiency improvements must be carried out to bring it up to standard. Only where these measures are not cost-effective i.e. where the improvements do not pay for themselves over a seven-year period, or where another recognised exception applies, can a landlord register an exemption and continue letting a substandard property.

What is coming – and when

The trajectory of travel is clear, even if the precise destination remains uncertain. The UK Government’s plans for non-domestic properties – including warehouses – have not yet been confirmed but based on prior proposals and the domestic reform trajectory, a rise to at least the equivalent of a "C" rating by 2030 is widely anticipated. The formal consultation response, originally expected in early 2025, remains overdue. That uncertainty is itself a problem, at a time when action is most needed.

The scale of the challenge

The numbers used by Motor Transport tell a stark story. With 82% of UK warehouses built before 2000 and a sector vacancy rate of just 3.3%, the industry has almost no buffer to absorb the loss of non-compliant space. If anticipated standards materialise, an estimated 18% of storage space could become unlettable by 2027, rising to 60% by 2030 without significant investment in upgrades. The sector cannot afford to wait.

The occupier's perspective

For occupiers, the EPC challenge is not merely an abstract regulatory issue. It is a lease issue, a cost issue, and potentially an operational issue.

Know your current EPC position

The starting point is basic but essential: does your property have an EPC, and if so, what is the current rating? You can check this via the government’s website (for properties in England, Wales and Northern Ireland). If your property is rated "C" or below, the pressure for improvement works is likely to increase significantly and quickly. The regulatory environment in Scotland is different to the rest of the UK, but for Scottish properties, you can check the Scottish EPC register.

Read your lease

The lease will determine your exposure and your rights. Occupiers should establish:

• Who bears responsibility for energy efficiency works? Repair and improvement obligations can sit with the landlord, the tenant, or be shared – the drafting matters enormously.
• What rights does the landlord have to enter the property? Many leases contain access rights for the purposes of carrying out works. Depending on the drafting, a landlord may be entitled to enter even where the tenant objects.
• What protections does the occupier have? Are there provisions limiting disruption or providing compensation if works interfere with trading? Tenants should verify this – not assume it.
• Can an occupier refuse entry? Under the current framework, if a landlord is prevented from accessing the property, they may be able to register an exemption – allowing the property to remain substandard without penalty to the landlord, whilst the tenant continues to occupy a non-compliant building.

Understand the cost allocation

Retrofitting a large warehouse is expensive. Occupiers must understand who is contractually responsible. In multi-let properties, landlords may seek to recover costs through service charges – whether that is permissible will depend entirely on the lease drafting. Some modern leases contain express sustainability provisions; older leases are unlikely to address this directly, creating grounds for dispute. Tenants approaching a lease renewal have a valuable opportunity to negotiate clarity and protection before signing up for another term or to relocate to newer energy-efficient premises.

Recommendations

• Act now: Don’t wait for the government's consultation response. Commission an independent energy audit to understand the investment required to reach a "C" and a "B" rating for your property.
• Engage your landlord early: Open a dialogue about their compliance plans and, where works are anticipated, seek to negotiate agreed protocols that minimise disruption – and get any agreements in writing.
• Take legal advice on your lease before a dispute arises: It is significantly harder and more expensive to protect your position once works are under way.
• Use lease events strategically: Rent reviews, renewals, and break clause decisions all present opportunities to renegotiate terms with energy efficiency compliance – and cost allocation – firmly on the agenda.
• Factor EPC ratings into any relocation decisions: Taking on a poorly rated property today may mean inheriting a significant compliance problem tomorrow.
• Invest in operational energy efficiency: Energy-efficient equipment, lighting, and heating controls can reduce running costs and, in some cases, contribute to improving a property's EPC rating – a sound commercial decision in its own right.

The bottom line

The EPC compliance challenge for the UK warehousing and logistics sector is real, significant, and fast approaching. With vacancy rates at historic lows and the majority of warehouse stock likely to fall below forthcoming minimum standards, the margin for error is negligible.

Occupiers who treat this as tomorrow's problem risk finding themselves in non-compliant premises, subject to disruptive landlord works, or – in the worst case – unable to remain in occupation at all. The time to understand your position and act is now.