Upgrading the sustainability credentials and quality of older offices can push the rents tenants are willing to pay closer to those of prime new-build stock.

But a gap still remains between the two, according to a new analysis.

Knight Frank found that average rents achieved for secondhand offices in London with C-rated energy performance certificates and below — those deemed not to be energy-efficient — are 35% below prime rentals. That gap has widened from 27% below prime levels in 2020.

The agency also examined 130 office retrofit and refurbishment projects undertaken in England and Wales between January 2020 and July 2024, all of which improved the building’s amenity and EPC rating from C and below to B or better. It found that the gap relative to prime rental levels was closed by an average of 18 percentage points after retrofitting and refurbishing.

That leaves an average gap of 17% compared to prime rents.

Knight Frank said the uplift varied by location, level of intervention, number of leases before and after intervention, and market-specific factors such as supply. It attempted to isolate the impact of retrofits and refurbishment by anchoring the average rental level before and after intervention to eliminate the impact of any market increases in rents over the period.

Retrofitting and refurbishing older offices had a positive impact on lease lengths and void periods as well, according to the analysis.

In London, retrofitted and refurbished offices that achieved BREEAM Outstanding, Excellent or EPC A were prelet an average 5.6 months ahead of completion, with an average lease length of 8.5 years. For projects that achieved BREEAM Very Good or EPC B, the average lease length was 7.4 years, with preletting achieved an average 2.3 months ahead of completion.

When analysing retrofit options, owners will need to decide if the rental boost that can be achieved justifies the cost.

The baseline cost of upgrading an EPC D-rated office building to meet the potential EPC B minimum is calculated as £113 per SF, Knight Frank said. The addition of amenities such as collaborative meeting spaces, fitness and well-being facilities, and private terraces put total upgrade costs at £268 per SF.

“With 75% of office space set to fall below proposed sustainability standards by 2030 and occupier demand focused on sustainable and amenity-rich workspaces to enhance day-to-day occupancy, collaboration and productivity there is an urgent need for landlords to upgrade and reposition older buildings,” Knight Frank Head of ESG Research Flora Harley said in a statement.

“The decision on how to approach the retrofit and refurbish challenge will be determined by a wider variety of asset-level and market factors, but through this detailed analysis of recent projects we have been able to provide an indication of the relative rental uplift achievable, as well as increase in lease lengths and reduction in voids, all of which will underpin asset values.”

Cost and viability will be a challenge for some, Harley said, “but with the gap between the best workplaces and the rest continuing to widen the cost of inaction is growing.”