Offices with low energy label increasingly worth less

Learn more in this article:

• Office buildings with energy label C or lower have dropped dramatically in value, sometimes as much as 40 percent, according to research by Maastricht University.
• Legislation surrounding the energy label increasingly determines property value: the lower the label, the lower the value.
• Properties with high energy labels have higher rents (6.5% higher) and are vacant for less time compared to inefficient properties.
• Invest now in making your property more sustainable to prevent future depreciation and vacancy.

The more energy an office building consumes, the lower its value. Research by Maastricht University shows that real estate with energy label C or lower is struggling. In recent years, these energy-guzzling properties have dropped significantly in price. Not only do buyers pay 20% to 40% less for the properties, rents for inefficient properties are also significantly lower.

Buyers pay 20% to 40% less for offices with low energy labels

As a property owner, you know that the value of your properties depends on numerous factors. But did you also know that due to changing laws and regulations, the energy label directly affects the value of your property?

The market is reacting to changes in government policy, and this is particularly evident in the value of offices that do not meet the mandatory energy label C or higher. Recent research by Maastricht University revealed a reduction of up to 20% in the value of inefficient properties. In recent years, less efficient office buildings (energy label D or lower) have been sold for significantly lower prices. Investors now pay very close attention to the energy label when purchasing real estate. By comparison, in the owner-occupied housing market we see only a 10% price difference between houses with labels A and D.

Researchers see the biggest drop in properties with energy label G.

"Especially the bottom of the market, with the really inefficient buildings, has dropped massively in price." - Nils Kok | Professor of real estate economics in Maastricht.

So: do you have a property with energy label G in your real estate portfolio? Then prepare for a price drop of up to 40%.

Legislation surrounding office energy label

Since early 2023, an energy label C is mandatory for any building used as an office. These new rules are putting pressure on the real estate market, the figures prove. Before 2018, only 63% of offices had an energy label C or higher. Fast forward to the end of 2022, that number will have risen to 77%. 

So real estate is, fortunately, becoming more and more sustainable. And that sustainability pays off. Properties with a higher energy label are worth more to investors. Buying property with a low energy label is a lot less interesting. For the real estate owner, an office building with an energy label of D or lower is immediately confronted with high costs for making the office building more sustainable.

Sustainable office buildings yield more rent

In addition to an effect on the sales value of properties, the study also shows an effect on rents. The researchers conclude that sustainable properties yield about 6.5% higher rents than the less sustainable and therefore inefficient properties. Not only was a proven effect found on rents, economical office buildings are also vacant for less time. Properties that meet ESG standards have lower vacancy rates than non-sustainable properties.

See also the: CBRE's EMEA Sustainability report

Invest in your energy label now to stay profitable in the future

The challenge for property owners is clear: invest now so as not to come up empty-handed later. 

Kok emphasizes the financial reality: "If you have to invest €60 per square meter in sustainability, that's a substantial amount for property owners. Even with a rent increase of 5% on average after preservation."

The choice to invest in sustainability now can mean the difference between profit and loss in the future.

In short: while this legislation may not seem convenient to you right now, it also gives you a push to make your property more sustainable faster. And that's always a win-win in the long run!

Are you curious about how the energy label affects your rental values? Discover our calculation examples here and see how a high energy label can work in your favor.