UK Industrial: 2031 Energy Deadline Approaches

Over the past several years, MEES regulations have undergone multiple consultations, creating market uncertainty as landlords waited for clear guidelines before investing in energy improvements. The new MEES policy states that from 2031, private rented commercial buildings over 1,000 square metres in England and Wales will need to achieve at least an EPC B rating (where cost-effective). This policy presents both challenges and opportunities for the industrial sector, where most properties currently fall below this standard. The retained 7-year payback test offers potential relief however many properties will require energy efficiency upgrades to continue to be lettable.  

Industrial buildings over 1,000 square metres must reach EPC B by 2031 where improvements are deemed practical, affordable and cost-effective. Across England and Wales, 69% of industrial spaces impacted by MEES are below EPC B, as of May 2026. This is slightly higher than offices (68%), and well above retail (51%). For payback exceptions, further clarity on assessment criteria would be welcomed to assist landlords in preparing for this change. The government has projected £360 million in annual savings for larger tenants in units falling within the scope of this legislation, however this reflects an assumption of full compliance and competitive energy pricing, and wider market conditions may influence outcomes. 

The amount of industrial spaces currently below EPC B varies across England and Wales. Wales faces 78% non-compliance among industrial spaces, the highest of the regions, followed by the North East (74%) and Yorkshire and The Humber (73%). These regions, which support UK manufacturing and logistics infrastructure, will have more work to do to reach the MEES requirements. Major industrial hubs in the West Midlands and North West show 72% and 71% non-compliance. The South East is better prepared with 63% of industrial properties requiring upgrades, still a significant amount of stock.  New MEES regulations present an enormous economic opportunity to create more energy-efficient, energy-smart industrial stock across the UK and provide much needed capex into underperforming assets across each region. 

Further to the regional disparity, there is variance between industrial properties based on their size. A soft majority, 52%, of big box units (10,000 square metres and above) are already compliant with 2031 MEES, while less than one-third (29%) of multi-let and mid-box units (1,000 to 10,000 square metres) are currently meeting this standard. Focusing on big box units, 80% are currently rated EPC C and above, reflective of market demand from larger occupiers to have more efficient spaces to meet their own sustainability targets and energy cost efficiency. JLL research shows that 83% of top industrial occupiers in the UK have a stated carbon commitment. This shift in tenant demand began a number of years ago and the result has been improved energy efficiency in new and retrofitted big box buildings, which the EPC data supports. At the smaller end of the market, more numerous SMEs have to date put less emphasis on sustainability and it is here that MEES legislation could have the largest impact. In keeping with our predictions for 2026, we would expect a focus on retrofits in the industrial sector to bring second-hand units to a higher standard. Market dynamics support this focus, with construction levels of new units dissipating and supply of second-hand space at a high the conditions may be right to escalate refurbishments. 

Two thirds of multi-let and mid-box units in the 1,000-10,000 square meter size bracket, are at least EPC C, suggesting less interventions likely needed to become compliant.[KM1.1] There is limited available data on the total size of the industrial market, however the VOA last released data on the stock of the total industrial market in 2023 which suggested that across England and Wales there was around 3.4 billion square feet of industrial stock across all sizebands. JLL estimates that around 85% of this was in units smaller than 10,000 square metres, this includes units smaller than 1,000 square metres which is outside of the scope. However with two thirds of units in the 1,000-10,000 square meter sizeband already achieving an EPC C rating this reflects a positive story for the industrial sector. However, the complexities and costs of upgrading each unit will depend on a number of factors, including the operational requirements of the occupier.

Currently, 52% of industrial spaces rely on natural gas heating—yet 64% of EPC A-rated and 53% of EPC B-rated industrial spaces use grid supplied electricity. This suggests achieving compliance will, in many cases, require heating system replacement, not merely incremental improvements. Given energy security and accessibility are crucial to business-as-usual, energy improvements for the industrial sector provide an opportunity to create more resilient assets. Upfront capex remains a barrier, but with energy reliability a critical part of operations, the business case for energy improvements is strong. According to Prologis’ Supply Chain Intelligence Report (2026) 90% of respondents stated they would pay a premium for sites with reliable energy infrastructure.   

Properties with lower EPC ratings and gas heating may require more expensive upgrades, yet these are often secondary assets with lower rental income to support investment. There is a clear need for energy improvements to be written into the overall value proposition for these assets to ensure the business case for energy-efficient, or even energy-smart, industrial buildings is clear to investors, landlords and occupiers. 

“Lease breaks present landlords with strategic opportunities to address MEES compliance in the near term. Within the industrial sector, we see some landlords pursuing performance standards that exceed MEES requirements, targeting EPC A/A+ ratings for enhanced leasing prospects in certain locations. We also support landlords with prospective tenant engagement to effectively mitigate MEES-related risks during fitout phases. This approach also creates opportunities to optimize energy efficiency and carbon performance during the lease term.

For properties with extended lease terms, we support landlords through comprehensive tenant engagement initiatives designed to establish strategies for in-situ refurbishments that ensure MEES compliance.”

Katie Krelle, Head of Sustainable Asset Services

"The government's announcement on MEES provides welcome clarity on the direction of policy travel, enabling landlords to focus their long-term investment planning and prioritise upgrades strategically. For the industrial sector, larger and newer units are generally well-positioned to meet the 2031 deadline. While secondary units within scope may face greater challenges in justifying upgrade costs, clear regulatory parameters allow for proactive planning. We look forward to further details on implementation, particularly regarding the seven-year payback assessment process."

Kirsty Draper, Head of Sustainability for UK Leasing Advisory

Assess your portfolio's compliance risk. Contact our Industrial & Logistics team to develop your 2031 MEES strategy.