Why Energy Performance Should Define Office Value

Commercial buildings sit at the heart of the global net-zero challenge. They consume vast amounts of energy and account for a significant share of emissions—around 30% of global final energy use and 26% of energy-related CO₂, according to the International Energy Agency.

Despite this enormous operational footprint, one of the strongest indicators of a building’s true value, its real energy consumption and Energy Use Intensity (EUI), is still largely missing from commercial real estate pricing.

This disconnect matters. When valuations overlook actual energy performance, they inflate the value of inefficient buildings and undervalue those that have already taken meaningful steps to cut energy waste.

As climate regulation tightens and occupier expectations shift toward higher-performing, lower-carbon spaces, the gap between a building’s perceived value and its true, energy-driven value is becoming increasingly pronounced.

A shift is underway. Markets are beginning to reward efficient, future-ready buildings, and both owners and investors are taking notice. As this conversation accelerates, it’s becoming clear that the next major transformation in commercial property will be driven not just by location or amenities, but by energy performance itself.

The Gap Between Valuation and Reality

Traditional valuation methods focus on factors such as rental income, cap rates, and comparable sales. These remain important, but they often rely on generic assumptions about operating costs, and that’s where the first issue arises.

Energy use is rarely factored into the valuation.

Whether a building consumes 100 kilowatt-hours per square metre per year or 300, valuation models typically treat them the same. Yet the difference in operating cost, regulatory exposure, and long-term asset performance can be significant.

This disconnect has real consequences. It can lead to an underestimation of future energy liabilities, overvaluation of outdated or inefficient assets, and undervaluation of modern, lower-EUI properties. It also obscures the financial impact of energy improvements—making it harder to justify upgrades that, in practice, deliver measurable returns.

Put simply, valuations that overlook real energy data offer only a partial—and often misleading—picture of a building’s long-term value.

Operating Costs Are Rising, but Valuations Haven’t Caught Up

Heating, cooling, and ventilation (HVAC) systems are among the largest operational energy consumers in commercial buildings, often accounting for 40–50% of total energy use and a significant share of utility costs.

When systems are outdated or poorly optimised, energy consumption can be much higher than benchmarks for efficient practice. Yet most valuation models continue to assume “typical” operating costs rather than actual measured performance.

As a result, inefficient buildings can appear financially sound on paper while quietly eroding net operating income (NOI) through higher energy costs, creating valuation risk that remains largely invisible in core metrics.

Regulation Is Increasing, and Inefficient Buildings Are Exposed

Around the world, governments are tightening rules to accelerate the decarbonisation of buildings. Under New York City’s Local Law 97, for example, buildings that exceed emissions limits face penalties of $268 per metric ton of CO₂e over the cap each year, with citywide fines projected to reach up to $900 million annually by 2030.

In the UK, Minimum Energy Efficiency Standards (MEES) impose fines of £5,000 to £150,000 for commercial buildings that fall short—penalties that scale with the length and severity of the breach. Similar pressure is mounting across Europe via the Energy Performance of Buildings Directive (EPBD), which is steadily raising the bar with tougher compliance timelines and upgrade mandates.

But here's the catch: both MEES and EPBD are anchored in EPC/BER ratings, not actual building performance. It’s a subtle but critical distinction. What’s being enforced is a projection—an abstract calculation of how a building should perform, not how it actually does. The fact this still passes for compliance reveals how tightly the EPC/BER has been stitched into our understanding of what “efficient” means.

And yet, efficiency—real efficiency—rarely lives on paper. It plays out in the daily rhythm of plant operation, occupant behaviour, and the ability to adapt in real time.

As these frameworks expand, inefficient buildings will face growing pressure, yet many valuations still fail to price in this regulatory risk. This is yet another reason why current valuations appear increasingly artificial: they assume a world where energy efficiency is optional. But that world is disappearing quickly.

The Market Is Sending a Signal: the Flight to Quality

Even in a subdued office market, one pattern is becoming increasingly clear: tenants are gravitating toward higher-performing buildings—those that are newer, smarter, healthier, and, potentially, more energy-efficient.

This flight to quality is actively reshaping demand in major commercial centres. Buildings that combine strong locations with good building ratings (EPC) are consistently achieving higher occupancy, stronger rents, longer lease commitments, reduced tenant incentives, and greater resilience in the face of market volatility.

This shift in tenant behaviour is a clear signal of where value is trying to move. Energy efficiency is no longer a secondary consideration—it’s becoming a central marker of commercial performance. However, A-rated buildings do not necessarily deliver better energy efficiency, but they have the potential to. The proof of the pudding will ultimately be found in the utility bill (a blog for another time…).

When You Account for Real Energy Performance, the Payback Looks Very Different

When energy upgrades are assessed purely on their impact on utility bills, many appear to deliver a payback period of three to five years. In a sector where efficiency gains can be difficult to achieve, that alone represents a strong business case. But focusing only on energy costs significantly understates the broader value these upgrades generate.

Energy performance influences nearly every financial lever within a commercial asset. When the wider impacts are considered—such as improved net operating income, stronger leasing outcomes, reduced regulatory liabilities, lower long-term capital expenditure, and greater operational resilience—the picture changes entirely.

In many cases, these combined effects compress the actual payback period to as little as one to three months, rather than several years.

This underscores a core issue: current valuation methods often fail to capture the full financial benefit of energy improvements. Efficiency is no longer a marginal feature or a soft ESG metric—it is a material driver of asset value. Once these dynamics are acknowledged, the economic rationale for efficiency becomes clear and difficult to ignore.

Reframing Building Value: A Role for Intelligent Optimisation

As the conversation around asset valuation evolves, the ability to accurately reflect operational performance—particularly in terms of energy use—is becoming more important. Buildings are no longer evaluated solely on location, lease terms, or aesthetics. Increasingly, they are being measured by how well they perform in practice.

This shift calls for new approaches to optimisation—ones that align day-to-day operations with long-term asset strategy.

At Symphony Energy, this is the space we’ve worked in for over a decade. Our focus is on helping building owners enhance energy performance through intelligent automation, advanced controls, and integrated data platforms. From HVAC optimisation and demand-responsive systems to granular monitoring of environmental quality, our technologies are designed to support both operational efficiency and broader asset resilience.

The aim isn’t simply to reduce consumption, but to surface value that’s often hidden from conventional analysis—value that becomes especially relevant in a market where efficiency, compliance, and tenant expectations are all moving targets.

As the industry continues to re-examine how value is defined and measured, technologies that make performance visible, actionable, and consistent will become essential. Symphony’s contribution lies in delivering that performance and making its visibility possible—not just for reporting, but for decision-making.