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The Green City
Future Proofing London
The Green City, the second part of our Future Proofing London report, explores how sustainability is reshaping the built environment. We examine the rise of greener, smarter, and more efficient commercial buildings, the growing importance of green leases, and how ESG factors are influencing property valuations.
With expert insights, this section highlights the urgent need to retrofit existing buildings, adopt innovative technologies, and embrace collaborative landlord-tenant approaches. We invite you to engage with our findings, through podcasts, events, and discussion, as we work together to ensure London remains a leader in sustainable urban development.
Contents
Pages 4-5......................Sustainability and the built environment
Rachel Bridge - Fisher German
Will Poole - Howells
Pages 6-9......................The future of commercial buildings: smarter, greener, more efficient
Jeremy Dowding - Fisher German
Martin Gibbons MRICS - Vital
Pages 10-13..................Light, medium, or dark - your choice of green lease
Rupert Collis & Ishfaq Hussain - Fisher German
Malcolm Hanna - Legal & General Investment Management (LGIM)
Pages 14-17...................ESG and Valuation - can property valuations be future proofed?
Tom Norfolk & Phil Winckles - Fisher German
David Hunt - The University of Built Envionment, Reading
Sustainability and the built environment
Rachel Bridge - ESG
If you work in the property sector, you will be cognisant of the fact that the built environment is responsible for almost 40% of the nation’s CO2 emissions and 33% of its water consumption*. Approximately 80% of the buildings, which will be in use in 2050, have already been built.
The built environment and sustainability are inextricably linked, and sustainability has become embedded in our culture. A range of policies and strategies have helped ensure this link is acknowledged and addressed. For example, requirements to deliver Biodiversity Net Gain (BNG) in developments has promoted development practices that leave natural habitats in a measurably better state than before, encouraging more sustainable land use and conservation efforts.
There have been moves towards retrofitting existing buildings rather than demolishing and rebuilding. This enables new buildings to be preserved while improving their sustainability credentials by adopting energy saving and carbon emission reduction strategies. Examples include installing renewable energy sources, such as solar panels and heat pumps in Heating, Ventilation and Air Conditioning (HVAC) systems to reduce reliance on fossil fuels. Where retrofitting is not possible and building must be rebuilt, across the sector there is an increase in the reuse and recycling of materials from demolished buildings.
Other innovations include the implementation of smart building management technology to minimise operational emissions generated by heating, cooling and lighting
systems. Energy Performance Certificates (EPCs) and Display Energy Certificates (DECs) are a measure of the Energy Efficiency Standard of the building. Consultations have also been launched to gather industry feedback on how best to implement more ambitious targets. While the government has not yet legislated for further changes, ministers have signalled an intention to raise minimum EPC requirements, reflecting both climate objectives and the growing importance of sustainability in the built environment.
Some companies are also pursuing opportunities to offset their carbon emissions and explore the use of green leases to put sustainability at the forefront of their building considerations.
A more holistic approach to sustainability in the property sector now centres on ESG (Environmental, Social, and Governance) baselining and data-driven impact assessment. ESG baselining involves systematically measuring and benchmarking a property’s performance across environmental, social, and governance criteria. This process not only supports regulatory compliance but also provides investors, landlords, and tenants with transparent data to inform strategic decisions. As ESG data collection and benchmarking mature, the property sector is moving toward
greater transparency, consistency, and accuracy . This shift not only aligns with evolving regulatory expectations but also enhances long-term asset value and resilience in a rapidly changing market.
Beyond buildings, cities like London face major environmental challenges, including climate change, pollution, and biodiversity loss.
This is largely due to a lack of green infrastructure, which plays a vital role in cooling urban areas, managing excess rainwater, supporting biodiversity, and improving public health. This is where the ‘Environment’ connects with
“
the ‘Social’ in ESG: positive environmental action leads to meaningful social benefits, underscoring the need to integrate all three ESG pillars into business strategies.
Sustainability is an integral part of owning, occupying, and managing a property. It is not a ‘green washing’ exercise, designed to pay lip service to saving the planet. It is an important part of the property sector’s commercial culture, as well as a creating valuable return on investment.
Rachel Bridge
Partner - ESG 07733 887108 rachel.bridge@fishergerman.co.uk
London’s future as a sustainable, inclusive, and liveable city will depend on the buildings we design, and the decisions we make now.
Both new and retrofitted buildings, along with the spaces between them, will shape who chooses to live and work in the city. There is growing demand for buildings with better energy performance, greater flexibility, healthier environments, and lower carbon footprints. Owners are responding, but the approach is crucial.
Ideally, designing from scratch with net zero in mind allows every material and every system to be optimised, with biodiversity at the forefront.
However, in a dense city like London, this is not always possible. Advancing retrofit knowledge is essential, as the challenge lies in balancing the environmental and economic costs of retrofitting versus new builds, a debate that is both political and practical. The ongoing M&S Oxford Street case highlights how conflicting agendas can delay progress.
As climate change brings higher temperatures and extreme weather, architects are adopting smart, site-specific solutions: reducing facade glazing to prevent overheating, using permeable surfaces to manage rainfall, enhancing natural features and even exploring floating buildings in flood-prone areas. Biodiversity is increasingly recognised as vital for urban resilience.
New standards like the UK Net Zero Carbon Buildings Standard* and the Australian-imported NABERS rating system ** are setting benchmarks for building performance and carbon footprint, while some London Boroughs are retrofit-first policies. These tools help designers and developers make better decisions and give occupiers clarity.
Mandatory requirements such as BNG will further support healthier environments. However, collaboration between local authorities and central government is critical, without it, even the most ambitious projects can stall.
With smart, design, clear policy and shared ambition, London is well positioned to lead the way and show how cities can truly ‘go green.’
*The UK Net Zero Carbon Buildings Standard (UKNZCBS) is a new framework that provides a technical standard for the UK construction industry to define and achieve net zero carbon in buildings across their entire lifecycle.
** The NABERS rating system is a performance-based system for rating the environmental impact of buildings, primarily in Australia and the UK.
* World Green Building Council
The future of commercial buildings: smarter, greener, more efficient
Jeremy Dowding - Commercial Property Management
The growing demand for sustainable practices and environmental responsibility in the built environment has led to a concerted focus on designing buildings which meet current and anticipated environmental, energy management, and operational goals.
However, as we have highlighted, 80% of the buildings which will be in use in 2050 have already been built. So, the future of our commercial buildings starts with those already in existence, bringing the challenge of preserving our architectural heritage while meeting sustainability goals.
As big a challenge lies in the efficient operation of commercial buildings, most importantly, balancing the oftenconflicting demands of its occupants, with a financial and ethical ambition to minimise energy consumption and waste.
At present we measure the theoretical energy efficiency of a commercial property at irregular intervals, using EPCs.
This typically occurs during a building sale or new lease negotiation. As a result, it is only a snapshot in time.
How a building is operated and occupied dramatically affects its environmental performance. Given escalating energy costs, occupiers are now keen to monitor and analyse real-time data related to the energy consumption of their workspace.
There is already a system which records the actual, rather than not theoretical, energy performance of public buildings, such as schools, hospitals, and government offices. Used primarily when monitoring buildings whose floor space exceeds 250 sq. m, ‘real’ energy consumption is calculated by analysing meter readings and energy bills. The annual assessment, which leads to the issuing of a DEC, provides an assessment of the actual energy performance of as building.
However, DECs are not currently considered to be a viable alternative to EPCs because they do not assess the fabric of the building, heating systems, insulation levels and renewable energy potential, vital metrics if we are to establish “a sustainable future for our built environment” (Baroness Taylor of Stevenage, Parliamentary Under-Secretary of State for Housing and Local Government in the foreword of the EPC consultation document).
While DECs concentrate on measuring actual energy use, they differ from EPCs in that they do not provide suggestions for
structural improvements or upgrades that could lead to long-term reductions in energy consumption. Instead, DECS offer a snapshot of a building’s present efficiency, typically reflecting how the building is operated, without identifying potential recommendations to address underlying structural inefficiencies.
The government has recently completed a consultation aimed at determining the most effective approach to reforming the Energy Performance of Buildings (EPB) framework. The consultation considered a range of potential metrics including:
• Energy cost: This metric could resemble the current EER (Energy Efficiency Ratio), which evaluates the efficiency of HVAC cooling devices, by comparing the amount of cooling output to the electrical energy consumed
• Fabric performance: This would likely assess a building’s insulation levels and promote increased fabric performance by monitoring, rather than predicting performance
• Heating system: This metric may involve ranking various heating systems according to their efficiency and associated carbon emissions
• Energy use: This is expected to focus on the energy consumed for heating and lighting, potentially including ‘plug in’ devices and appliances
The results of the consultation are due to be published this year, with final policy decisions and revised regulations scheduled to be finalised in 2026.
In many buildings, the occupiers manage functions such as heating, cooling, and lighting. Relying on human judgement inevitably leads to inefficiencies. For example, temperature fluctuations are often the result of manual interventions in response to an immediate need or even well intended actions, like turning off the heating at night. This can result in fundamental changes to the core temperate, which takes significantly more energy to correct.
To meet both the environmental and commercial demands of occupiers and owners, we are becoming more reliant on self-regulating intelligent buildings. Automation and smart systems, leveraging smart technology and Internet of Things (IoT), already play a greater role in how we optimise energy consumption in commercial buildings, as new stock comes to market and retrofitted buildings adopt smart HVAC systems. These technologies limit the need for human
interventions, optimise energy use, ensure consistent comfort levels for occupiers, and significantly reduce operational costs.
This shift is being driven by legislation, occupier demands and consumer attitudes to the need for adaptation to address climate change issues. The latter is probably one of the most compelling reasons why almost every major UK company and organisation is making public net zero commitments.
Businesses are now actively discriminating in favour of properties which reflect their commitment to environment related best practices, in terms of their operational performance, as well as their commitment to social responsibility. In addition, the rising cost of utilities is also proving influential when it comes to businesses and their ‘energy conscious’ agenda.
Larger corporate tenants are leading this change, using their market influence to push for more sustainable and more technologically enabled ’smart’ buildings. Smaller occupiers may not have enough influence to initiate change alone, but they gain from larger players’ broader investments.
Despite positive innovations and behaviour changes, the question still remains: what do we do with our heritage buildings?
Most people associate smart buildings with new builds, but the Pirelli 35 building in Milan, a 65-year-old, 45,000 sq. m, 11-storey property, proves that heritage architecture can be successfully fused with cutting edge technology to create a smart, energy-efficient asset which benefits the environment, occupiers and its investors. Heritage and sustainability do not need to be mutually exclusive.
The new integrated management system there brings together HVAC, lighting, fire safety, and electrical distribution, using advanced environmental sensors to enhance both energy efficiency and tenant comfort. Facility managers can monitor and optimise every system through a single, cyber-secure interface that provides access to a network of smart sensors.
The result is enhanced energy performance, with energy consumption reduced by 60% and CO2 emissions reduced by 2000 tonnes a year, as well as enhanced occupiers’ comfort.
Given the fact that there are almost 20,000 heritage buildings in the City and Greater London, the opportunity to transform most of them into energy efficient assets is enormous. However, innovation usually comes with a cost. The challenge is to find cost-effective solutions which
align both commercial and financial realities, with legislative requirements.
It is interesting to note that listed buildings in the UK are not exempt from EPCs, although they can claim exemptions if implementation of energy efficiency measures would alter the buildings fabric or character.
Landlords willing to embrace bold, forward-thinking strategies will find exciting opportunities to innovate. Among these, hydrogen stands out as a renewable energy source that is pivotal to industrial decarbonisation. Its ability to be stored efficiently and its resilience to climate variability, unlike wind and solar, make hydrogen a compelling option for commercial buildings.
As the sector evolves, hydrogen is poised to play an increasingly significant role in sustainable energy solutions, offering year-round reliability and supporting the transition to a low-carbon future
From an investment perspective, whether making operational improvements or investing in major upgrades, these changes are vital. Buildings which perform well operationally and meet the expectations of modern occupiers will retain stronger rental yields and remain attractive to occupiers.
In a market as competitive as London, future proofing commercial property through smart, sustainable solutions is a strategic imperative.
Jeremy Dowding
Partner - Commercial Property Management 07958 420636 jeremy.dowding@fishergerman.co.uk
The EPC national measurement system has now been in place for over 17 years. With continuous refinements, it has become accurate, robust and fit-for-purpose. Over 1 million commercial rental buildings have a lodged EPC on the government’s public database.
Phase 1 of commercial rental Minimum Energy Efficiency Standard (MEES), introduced in 2018, has been a game-changer. Energy inefficient EPC Grade F & G buildings are now a thing of the past. This initiative has driven significant improvements in the UK’s stock of commercial buildings.
Phase 2 of commercial rental MEES is expected to be announced by the Government before the end of 2025. The EPC standard for commercial rental units is forecast to rise to Grade B for both new lettings and existing leases.
The excellent news for landlords is that as the nation’s carbon emissions from grid electricity has been falling, thanks to the construction of the world’s largest offshore wind farms in the British North Sea, securing an EPC Grade B for an office or industrial building is much easier, especially if the heating is all-electric.
For property investors, now is the perfect time to future proof by removing gasburning boilers from their buildings and replacing them with electric alternatives such as air-con or heat pumps. Not only will this help them achieve an EPC Grade B, but it will set the building on the path to being net zero carbon in operation. This is a badge that an increasing number of tenants are seeking before signing a new lease.
Martin Gibbons MRICS Director Vital vitaldirect.co.uk
Light, medium, or darkyour choice of green lease
Rupert Collis & Ishfaq Hussain - Lease Advisory
According to the World Green Building Council “the greenest building is the one
that is already built.” This
is why a property’s environmental impact and sustainability credentials are so important for businesses of all sizes and why the Government has published a schedule for raising minimum EPC ratings for commercial properties.
While it remains true that the design of new builds does help to address a property’s greenhouse gas (GHG) emissions, as most of UK property stock already exists, their energy credentials can only be improved retrospectively.
This is why green leases have a significant role to play in any decarbonisation strategy. The incidence of landlords and tenants collaborating to reduce the environmental impact of occupying a property, while enhancing the value of their investment in the building, is growing in frequency.
There is not yet a legal requirement in the UK to enter a green lease, however there are pieces of legislation which impose energy efficiency requirements to ‘green’ the ownership and occupancy of a commercial building, such as the MEES regime. The definition of a green lease, sometimes referred
to as a sustainability lease, remains loosely defined. However, they can be characterised as one or more clauses in a lease which commit landlords and tenants to work together to improve the environmental credentials of a building, ‘futureproof’ their properties by anticipating potentially stricter environmental laws and policies and save money by reducing the building’s carbon footprint.
The gradual increasing level of adoption of green lease clauses has been driven by the mutual benefits they provide owners and occupiers. These might include energy efficiency, waste reduction, water efficiency, recycling and waste management, data and intel sharing, which is especially popular in multi-occupancy buildings used by more than one occupier or lessee and/or the use of sustainable materials
during a refurbishment or retrofit.
In an age of escalating energy costs, energy efficient buildings represent another incentive for landlords to reduce occupational costs by ensuring that their properties have as little energy waste as possible. Investing in ‘greening’ buildings, by ensuring they meet and exceed existing and impending standards, enables landlords to command higher rents and encourage tenants to stay longer.
Working together
Building provisions into contracts right from the outset encourages tenants and landlords to work together to invest in sustainable initiatives, which both parties benefit from.
Today, tenants actively discriminate in favour of high-spec offices, with environmental standards high amongst their priorities.
Improved green credentials make buildings more efficient to run, more attractive to an increasingly environmentconscious workforce and help demonstrate a business’s commitment to sustainability.
For example, a growing number of tenants, especially in the industrial sector, have opted to install solar panels to improve their net zero credentials. The investment is quickly recouped from the savings in energy bills, while landlords see their buildings enhanced at no cost: a win-win outcome.
In recent months, greater clarity has emerged in respect of green leases, as they grow in popularity. There are three broad categories of green leases:
• Light green leases require only a limited commitment from both parties and are generally not legally binding
• Medium green leases feature limited obligations on both parties but stops short of imposing any financial burden
• Dark green leases are legally binding and require significant commitment to sustainability
Green clauses continue to develop in response to developments in monitoring and building management technology, as well as legislative changes.
Green leases can enhance real estate portfolio values through both perceived and tangible benefits. They improve marketability by attracting sustainability-minded tenants and strengthening ESG credentials, which can boost a property’s appeal to investors. In practical terms, they often lead to operational cost savings, ensure compliance with tightening environmental regulations, and can support higher rents and increased asset values.
Additionally, they may unlock access to green financing or other incentives. The extent of the value uplift depends on careful drafting, market demand for sustainable buildings, and the measurable environmental performance of the property.
It is no wonder then that despite being introduced less than 20-years ago, green leases are growing in popularity in London as an integral part of a wider sustainability mix.
Partner - Lease Advisory 07966 481501 rupert.collis@fishergerman.co.uk
Partner - Lease Advisory 07890 418693 ishfaq.hussain@fishergerman.co.uk
Rupert Collis
Ishfaq Hussain
“It’s clear that green leases are no longer a niche concept but an important feature of London’s commercial property landscape. Since 2011, green clauses have been embedded into our leases, but their effectiveness hinges on the relationship and collaboration between landlords and tenants. This partnership ensures asset sustainability plans are considered and realistic decarbonisation timelines are created and regularly reviewed. Achieving net zero is not a one-off milestone, it’s a transition process, an ongoing conversation shaped by intervention opportunities, financial constraints, and practical realities.
The tightening of MEES and EPC regulations has highlighted the importance of green leases, to support the need for genuine cooperation. These leases can provide a basis for working together to increase energy efficiency, waste reduction, and sustainable retrofits. This collaboration offers the possibility of delivering benefits to both occupiers and landlords e.g. by reducing operational costs and helping both to achieve sustainability objectives. We also believe that collaboration helps support occupier retention.
Excellent sustainability credentials are now regarded as important requirements by many occupiers seeking top grade office space.
As the sustainability landscape evolves rapidly, we are developing new programmes to increase collaboration with our occupiers. Our Vizta occupier engagement platform supports the sharing of information including energy use data, while offering advice and services to help our occupiers become more sustainable. Our Integrated Energy Solutions programme provides the opportunity for us to work with our occupiers through the provision of on-site renewable energy systems and electric vehicle charging.
Malcolm Hanna Senior Sustainability Manager Real Assets
Legal
& General Investment Management (LGIM)
ESG and Valuation - can property valuations be future proofed?
Tom Norfolk & Phil Winckles - Valuation
The RICS Red Book, updated in March 2025, made the integration of ESG considerations a mandatory practice when valuing properties.
The update aligns the professional standards for property valuation, with recent industry developments concerning net zero and ESG practices, as well as the adoption of AI and emerging technologies. The latter are critical determinants influencing risk and return and therefore factors which play a key role in assessing their potential influence on property values.
It also reflects the fact that the combination of legislation, regulation, commercial priorities, and public opinion has created a compelling and irrevocable tsunami of pressure on companies, organisations, cities, and nations to decarbonise and meet highly publicised net zero targets. Changes to the Red Book therefore ensures that valuers of commercial and residential assets and portfolios have a framework which allows them to make valuation judgements which are aligned with the evolving regulatory and market priorities which are shaping our future.
Valuing in a net zero world
The ability of the current generation of valuers to accurately determine and assess the impact of net zero and ESG practices depends heavily on their experience, expertise, and access to robust data from specialists such as fund and asset managers, net zero practitioners, occupiers, owners, and investors.
There is much discussion around ‘significant ESG factors’ but determining which of these will materially impact a property’s valuation requires skills and knowledge that may still be developing within the valuation profession. While valuers have long applied proven methodologies to assess the influence of traditional factors such as location, condition, size, and layout, simple market fundamentals may not be sufficient when it comes to ESG considerations. Forming a qualified
It is important
to note
that putting a value on ESG factors and the impact they will have on the operational and financial aspects of the business will ensure
that investors, tenants and landlords will be better incentivised to think strategically about their carbon footprint, energy efficiency and the social impact associated with their influence over and interaction with the built environment.
opinion on the influence of these factors may, at this stage, still depend on collaboration with other professionals and the availability of relevant, reliable data.
Doing this will also give investors and real estate lenders far greater confidence that embracing net zero and broader social and governance initiatives and practices will sustain and ultimately enhance the value of assets and portfolios they own.
As these factors become embedded in real estate thinking, the data and benchmarking will mature to follow the updated regulatory guidelines valuers are required to adhere to.
Values will ensure continued transparency, consistency, and accuracy of all future valuations.
London - An environmental leader
London is a global city with mature, transparent, and sophisticated real estate stakeholders that it has been at the forefront of the nation’s property ESG journey. The City has countless examples of assets enjoying a ‘green premium.’
Buildings with Building Research Establishment Environment Assessment Methodology (BREEAM) certification, low emissions and/ or strong occupier engagement will continue to perform strongly from a transactional perspective.
In contrast, buildings with poor ESG credentials, particularly where the viability of retrofitting is questionable and data
benchmarking is patchy, will be subject to what is termed a ‘brown discount’. Therefore, if landlords and owners of browndiscounted assets want to compete in a market populated by educated and discriminating occupiers and purchasers, they risk being left behind with stranded assets or portfolios.
A potential ‘silver bullet’ for this scenario could be permitted development, allowing for changes to the use of a building without the need for full planning permission in certain circumstances. A good example of this has been the change of use from office to residential. This flexibility can play a critical role in addressing ESG challenges, as it offers a viable route for owners of underperforming assets to repurpose them in ways that improves environmental performance, social value, and long-term viability.
For instance, converting outdated office space into energyefficient residential units not only reduces vacancy and waste but also aligns with sustainability goals, extending the building’s lifecycle and potentially incorporating modern, lowcarbon technologies.
By enabling more adaptive reuse, permitted development can bridge the gap between current ESG shortcomings and future proofed, higher-performing assets, transforming liabilities into competitive, compliant, and desirable properties in the marketplace. More specific to the residential letting sector is the fact that new developments, with strong ESG credentials, are already performing better than older stock with poor energy efficiency.
Local authorities’ considerations
Local authorities and housing associations will need to be particularly alert to the impact ESG compliance is already having on the long-term viability of their assets and portfolios. They will also need to reflect on their capital expenditure and investment strategies if they want to optimise asset and portfolio values, as well as ROI.
Key to the greater focus on ESG aspects of valuation is the need for landlords, occupiers, and investors to understand the link between ESG factors, the short-term operational
benefits, as well as the longer-term occupation and/or income sustainability of their assets. Underpinning all this is the need for accurate data collection and efficient monitoring frameworks.
For older buildings, reliable ESG data remains patchy, so the judgements of experienced valuation teams will be critical.
The 2025 Red Book revision is an important development for London’s and the nation’s real estate market. It will create a credible framework and reinforce the efficacy and relevance of asset and portfolio valuations.
Partner - Valuation 07884 415532 tom.norfolk@fishergerman.co.uk
Partner - Valuation 07903 499937 phil.winckles@fishergerman.co.uk
Tom Norfolk
Phil Winckles
“In the last 18 months, the term ESG has become somewhat politically loaded, and we are seeing certain investors shy away from using the term even if they believe in the underlying principles because evidence suggests that buildings with strong ESG credentials perform better in the marketplace.
However, having carried out research in this area, there remains an obvious lack of knowledge and training surrounding the recognition of ESG factors among valuers, with many stating that they are unsure what data and factors should influence their valuations.
Various rating frameworks exist, BREEAM, Leadership in Energy and Environmental Design (LEED) and EPCs being well established, but it can be difficult for valuers to translate these ratings into accurate valuations.
The latest version of the RICS Red Book contains vastly improved guidance and requires valuers to recognise ESG issues throughout the process, from the terms of engagement stage to the final report.
Ten years ago, most valuers wouldn’t have been able to define social or governance factors and how they can affect a building. While the Red Book doesn’t provide a checklist for valuers, it provides a framework which helps them to understand what they should be looking for.
Furthermore, there are opportunities for valuers here. We are seeing more and more finance providers and banks willing to offer specialised finance for buildings with strong ESG credentials, and there is a demand from investors wanting to put their money into these high-quality assets, so it is essential their values are measured as accurately as possible.
David Hunt Senior Lecturer
The University of Built Environment, Reading