A stranded asset is an asset that loses significant value or becomes unusable before the expected end of its economic life.

There are three main ways that the climate crisis causes stranded asset risk in real estate:

1. Regulation: Energy and environmental regulations are getting tighter, e.g. requiring higher EPC ratings. If your property doesn’t comply, you can’t legally let or sell it.
2. Market demand: Inefficient, high-carbon assets are becoming less desirable due to corporate climate targets and public concern about high energy bills and climate change.
3. Physical risks: From overheating to flooding and sea-level rise, your properties could be damaged by climate impacts, impacting rental income, maintenance costs and insurance premiums.

We'll look at each of these in detail shortly, but first: an anecdote from one of our clients. During the 2026 summer heatwaves, a property company we support was inundated with requests for air conditioning and complaints from tenants that their homes felt “uninhabitable” in the extreme heat.

If they are overheating now, how bad will it be in 3, 5 or 10 years, as climate breakdown makes 40°C UK summers the "new normal”? (And yes, we hate that phrase too - forgive us.)

There'll be cancelled leases. Low occupancy rates. Lost value. In short, these properties could become stranded assets.

In this piece, we'll explain what the three main causes of stranded assets are, and what you, as asset managers and landlords, can do to protect your portfolios.

Worrying about how you’ll meet the new EPC standards? You’re not alone.

The UK government recently confirmed that it intends to raise the required minimum EPC rating for commercial property to a ‘B’ rating, with landlords having to meet this standard by 2031. 87% of offices in the UK’s major cities currently fall below a ‘B’ rating and will be unlettable under the new rules. This means most commercial properties will soon require upgrades. On the residential side, the UK’s Warm Homes Plan released in March 2026 requires landlords to upgrade rental properties to at least an EPC ‘C’ rating by 2030. This means around 2.5 million homes will need retrofits.

Failure to comply could mean fines of up to £150,000 per commercial property and being unable to let them until improvements are made, not to mention a blow to your reputation.

To be clear, these standards are not yet enshrined in law. But the direction of travel is clear, and with major commercial retrofits taking at least a year to complete, landlords need to act now to avoid being caught out.

A major flaw of EPCs is that they are based on operational energy costs rather than energy efficiency, so as long as the cost of electricity is higher than the cost of gas, a high EPC won’t necessarily mean a low-carbon home. If we’re honest, they are a pretty pants measure of progress. However, this is set to improve with the decoupling of gas and electricity prices and plans to reform EPCs to measure how well a home retains heat.

But even with reform, meeting EPCs does nothing to address the other causes of stranded assets – shifting market demands and physical climate impacts.

If you only optimise for meeting minimum requirements, you might end up needing to do two costly retrofits. We recommend taking a more holistic view now, to ensure you’re really future-proofing your property portfolio.

As an asset manager, anything that harms tenant satisfaction will be top of mind, as this directly impacts tenant retention and void rates.

What we’re seeing in the market is more demand for low-carbon properties and falling demand for inefficient, high-carbon buildings. Highly efficient low-carbon buildings can attract a ‘green premium’ and be more desirable to tenants, due to lower energy bills. 72% of the respondents to this RICS study believe that green buildings achieve higher rents.

On the other hand, inefficient, poorly ventilated high-carbon buildings are now seeing a ‘brown discount’, indicating they could become stranded assets.

How do corporate climate targets affect commercial property assets?

Over 10,000 companies have set science-based targets. Many of them will be looking at their office or retail premises with a critical carbon lens.

One of our clients, which owns many properties across London, recently had a tenant vacate a building specifically because it didn’t align with their climate targets.

Special mention: Higher education institutions have a particular need to make their campuses desirable and future-proof to attract students. And as owner-occupiers, they have an incentive to take a more holistic, longer-term view.

How does tenant demand affect residential property value?

Energy efficiency has become a primary factor in tenant choice.

And as renters and homebuyers are increasingly concerned about energy security, homes that are heat pump-ready and equipped with solar panels and batteries are highly desirable and increase property values. (These are already mandated for new-build homes through the Future Homes Standard, and the existing housing stock will be viewed against this new baseline.)

Housing associations are paying particular attention to energy efficiency, as their social mandates mean they need to support low-income tenants struggling with soaring energy bills.

Most of the UK real estate market is completely unprepared for the physical impacts of climate breakdown.

The tenants we mentioned earlier are not alone. 80% of UK homes are now overheating in summer, four times higher than a decade ago. And in the commercial sector, overheating has a direct impact on productivity, and the Climate Change Committee (CCC) has recommended that the UK adopt maximum working temperatures. Addressing this will become key to maintaining high occupancy rates and tenant satisfaction.

Flooding is also a growing risk. According to the CCC, 6.3 million properties in England are in areas at risk of flooding, and this is predicted to rise to around 8 million (25% of all properties) by 2050. Flooding risk increases maintenance costs, and insurance premiums are also rising due to climate risks, and some properties are becoming uninsurable.

We recommend landlords and asset managers adopt a holistic, long-term strategy that goes beyond minimum compliance.

Start with a climate risk assessment of your whole portfolio. The Carbon Risk Real Estate Monitor is really useful for pinpointing the year that properties will become stranded, using science-backed transition pathways.

Once you know which properties need upgrading first, you can plan your retrofit strategy and schedule. A deep retrofit is an investment that increases property value, increases tenant retention, reduces void rates and ensures the asset is future-proofed for decades to come.

Our tips:

• Consider what ‘stranded’ means to you: The priorities of your stakeholders (asset owner, investor, tenants) will determine where to focus your budget. E.g. if tenants have complained about overheating, start there.

• Avoid ‘EPC tunnel vision’: You’ll want to continue to improve ratings to comply with EPC and MEES regulations, but don’t stop there. Consider market demands and climate resilience. This could mean improving ventilation and passive cooling to make the building resilient to extreme heat. It could mean swapping a gas boiler for a heat pump to address tenant concerns about gas prices.

• Fabric first: High-performing building envelopes (insulation, windows, airtightness) are vital to optimise energy efficiency and improve both Summer and Winter comfort levels. Then consider low-carbon heating and on-site renewables like heat pumps and solar PV.

• Use best-practice frameworks: If you want to attract premium rates and future-proof your assets for the long term, we suggest using the new Net Zero Buildings Standard, which aligns with a 1.5°C pathway.

Our people-shaped support

At Bioregional, we pride ourselves on working holistically and collaboratively - and that's exactly what we do when we're helping clients future-proof their real estate assets.

When we’re supporting a retrofit, it’s usually not the only thing we’re doing with that client. We might be supporting their corporate strategy, climate targets, ESG reporting, or employee engagement. This means we can join all the dots and achieve better outcomes.

Our team combines huge built environment experience with real-world business literacy to support everyone from registered social landlords and housing associations, to landed estates and corporates. For example, we’ve worked with The Portman Estate on their retrofit strategies. We also worked with developers Sage Homes and PlaceFirst to create a roadmap to decarbonise their property portfolios.

We can help at any stage of your journey, ensuring none of your built assets become stranded.

Want to find out how we could help you? Say hello here.

About our authors

Adam Lane

Adam is a technical analyst with 20 years in the industry and a background in mechanical engineering. His current focus at Bioregional is energy modelling and net-zero design.

Adam has Mechanical Building Services expertise and Building Physics experience, having previously worked for Arup, WSP Group, Greengauge and as an EPC Contractor. As a certified Passivhaus designer, Adam has an appreciation of wider construction processes and methods, and the importance of fabric-first design. ​

Ellen Hayward-Seers

Ellen is a sustainable business consultant, supporting clients in the real estate sector with sustainability strategies, staff engagement and reporting.

Ellen works across carbon footprinting, strategy development and sustainability reporting for a range of clients including The Portman Estate, where she leads the carbon footprint and strategy development for its complex property portfolio.