The government has finally provided greater clarity on the future of energy performance certificates. Landlords of large commercial buildings are expected to have until 2031 to achieve an EPC B if the proposed legislation passes Parliament.

Industry estimates suggest this could leave around £600B of commercial property requiring improvement.

But regulation hasn't created the performance problem facing commercial real estate: It has made an existing one much harder to ignore, said Re:sustain Chief Business Officer Katie Whipp.

Across Europe, 95% of asset managers surveyed by Re:sustain plan to improve the energy efficiency of their portfolios, while more than 80% are targeting reductions in energy consumption of 10%-30% over the next three years.

Yet every respondent reported holding stranded assets. Around 58% of respondents said 10%-30% of their commercial real estate portfolio currently suffers from poor energy performance, while 39% expect the proportion of stranded assets they hold to increase by 10%-25% over the next five years.

Overall, ambition and outcome have quietly come apart, Whipp said.

“Poor energy performance isn't a future risk — it is already showing up in how assets are valued, financed and managed,” she said. “The question now isn't whether buildings need to improve. It's why, after years of targets, technology and better data, the industry is still struggling to turn ambition into performance.”

Bisnow spoke to Whipp about whether the industry has been looking at the wrong problem, and whether the next phase of decarbonisation is as much about how buildings are operated as how much capital is invested in them.

Bisnow: If the industry knows what the problem is and has targets to fix it, why are buildings still underperforming?

Whipp: For years, we've treated decarbonisation as primarily a question of ambition: Do owners understand the issue, are they setting targets, are they investing in technology, are they collecting enough data?

Increasingly, the answer to those questions is yes. We therefore have to look beyond whether organisations want buildings to perform better and ask whether the way we operate them enables that to happen.

Take a single commercial building. You might have an asset manager, property manager, facilities manager, a building management system provider, engineering contractors, sustainability teams and multiple occupiers involved in its operation.

Each one can be doing its job properly, and the building can still consume significantly more energy than it needs to.

The incentives don't always line up cleanly either. A landlord can see an intervention as an investment that reduces the occupier's energy bill. An occupier can see the same intervention as something that ultimately enhances the landlord's asset value.

Neither is necessarily wrong, but it creates an environment in which waiting for somebody else to act can become entirely rational. Responsibility is distributed across the building, while accountability for the outcome often isn't.

Bisnow: Are owners too quick to assume that an underperforming or stranded building needs significant capital investment?

Whipp: We need to be much more precise about what we mean when we describe a building as underperforming. There is an important distinction between physical obsolescence and operational underperformance.

Some buildings absolutely need major capital investment. Plant needs replacing, fabric needs upgrading, and ultimately there are limits to what optimisation can achieve.

But there are also buildings being discussed in the context of retrofit and stranding that simply aren't operating anywhere close to their existing potential.

Plant can run for longer than necessary. Controls drift. Setpoints conflict. Operating strategies stop reflecting occupancy. Nobody deliberately designed the building to operate inefficiently. Inefficiency accumulates over time.

If we immediately jump from "this building is consuming too much energy" to "this building needs significant capex," we risk solving an expensive problem before establishing what the problem actually is.

Bisnow: Why has real estate become better at measuring buildings than actually managing their performance?

Whipp: That's probably one of the most important questions for the next phase of decarbonisation.

The industry has made enormous progress on data. We have better metering, sustainability platforms, certifications, reporting frameworks, BMS data and increasingly sophisticated analytics.

That's positive. You can't manage what you can't understand. But visibility and performance aren't the same thing.

A building can have an excellent sustainability dashboard and still be wasting energy every night.

Our research found that 89% of respondents believe technology has an important role to play in improving operational performance, yet 62% said only 20%-40% of their assets currently have an up-to-date BMS.

But simply installing more technology won't solve the performance problem if we retain the same operating model around it.

Buildings aren't static. Occupancy changes, weather changes, equipment degrades, and engineers make interventions. A control strategy that worked six months ago may no longer be optimal today.

We've spent a decade getting better at measuring buildings. The next decade belongs to those that can operate them better, consistently and at scale.

Bisnow: What does that mean for the growing number of assets at risk of becoming stranded?

Whipp: We need to be careful not to treat stranding as something that suddenly happens to a building in 2030 or 2031. Poor performance is already affecting how assets are valued, financed, leased and managed.

Regulation adds another deadline, but it isn't creating the underlying issue. It's exposing it. Meeting a regulatory standard and achieving good operational performance aren't necessarily the same thing.

The risk is that owners spend the next few years planning large retrofit programmes without first extracting the performance available from the buildings they already have.

Operational improvement won't remove the need for retrofit. But it can help owners understand the real performance gap, make better capital decisions and start reducing energy consumption now rather than waiting years for a major intervention.

Bisnow: So has the industry been diagnosing the stranded asset problem incorrectly?

Whipp: We've diagnosed it incompletely. Some assets need capital investment. Some need new technology. Some face genuine physical obsolescence. None of that goes away.

But we've underestimated the role of operational performance and, importantly, accountability for it.

That's why the next stage of decarbonisation is as much an operating-model challenge as a technology or capital challenge. Someone has to continuously own the outcome.

Because if 95% of the industry intends to improve its buildings and stranded assets are still expected to increase, the question is no longer whether we have enough ambition. It's whether we've created the conditions to turn that ambition into performance.

This article was produced in collaboration between Re:sustain and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.