Environmental, Social and Governance (ESG) considerations are becoming an increasingly important part of the commercial property market.

For landlords, investors and occupiers, ESG is no longer simply about sustainability. It is becoming another factor to consider alongside location, rent, lease terms, building specification, running costs and occupier demand.

So, what does ESG actually mean for commercial property owners – and could it influence the future value and marketability of their buildings?

What Does ESG Mean?

ESG stands for Environmental, Social and Governance. In commercial property, it considers how sustainably and responsibly a building is operated and managed.

This includes:

• Environmental: energy efficiency, EPC ratings, carbon emissions and renewable energy
• Social: employee wellbeing, accessibility, health and safety
• Governance: compliance, maintenance, risk management and responsible ownership

Not every ESG factor will be relevant to every property. However, these considerations are increasingly forming part of the decisions made by occupiers, investors, lenders and valuers.

Why is ESG Becoming More Important?

One of the main reasons is that businesses are paying closer attention to the buildings they occupy.

Energy costs, corporate sustainability targets and employee expectations mean that some occupiers are looking beyond headline rent when comparing properties.

A modern, efficient building may offer lower running costs, improved working conditions and better environmental credentials. For some businesses, these factors can form an important part of the decision to take a lease.

Investors are also considering sustainability when assessing commercial property.

JLL’s 2025 UK Investor Survey found that 76% of respondents said sustainability considerations had affected their investment decisions during the previous 12–24 months.

This doesn’t mean that properties with weaker ESG credentials are automatically unattractive. It does mean that investors are increasingly considering the potential cost of future improvements alongside more traditional property fundamentals.

ESG and Property Value

A building’s ESG credentials do not determine its value on their own. A well-located older industrial unit with strong occupier demand could remain an attractive asset, while a highly energy-efficient building in a weaker location may still struggle.

Location, rental income, lease terms, condition, supply and demand remain fundamental to commercial property value.

However, ESG can influence some of these factors.

For example, if an inefficient building is more expensive to operate, requires significant future capital expenditure or is less attractive to certain occupiers, this could become relevant when investors or valuers assess the property.

The Royal Institution of Chartered Surveyors (RICS) has also introduced updated professional guidance on considering ESG and sustainability factors within commercial property valuation.

ESG should therefore be viewed as one part of the overall property picture rather than a standalone measure of value.

What Does This Mean for Older Commercial Buildings?

Importantly, the growing focus on ESG does not mean every older commercial building needs extensive refurbishment.

Many established properties remain attractive because of their location, affordability, flexibility or suitability for particular occupiers.

For owners, the question is instead whether targeted improvements could make the property more competitive.

Depending on the building, these could include:

• LED lighting
• Improved insulation
• More efficient heating and cooling
• Solar PV
• Improved glazing
• Smart building controls
• EV charging facilities

Some improvements may help reduce occupational costs, while others could improve the building’s appeal to prospective tenants.

The appropriate level of investment will depend on the individual asset and the market it serves.

Energy Efficiency and Occupier Demand

For businesses taking commercial premises, rent is only one part of the overall cost.

Business rates, service charges, maintenance and energy costs can all contribute to the total cost of occupation.

Consider two similar industrial units. One may have a lower headline rent but older heating, lighting and insulation. Another may command a slightly higher rent but offer modern systems, LED lighting and better energy efficiency.

Depending on how the occupier uses the building, the difference in running costs could influence which property represents better overall value.

For landlords, understanding what matters to prospective occupiers can therefore help inform decisions about refurbishment and investment.

ESG Could Also Create Opportunities

ESG should not only be viewed as a risk. For owners and investors, there may be opportunities to improve and reposition existing commercial buildings.

A well-located older property with scope for energy improvements could potentially be upgraded to meet the expectations of modern occupiers without requiring complete redevelopment. This is sometimes referred to as “brown-to-green” repositioning.

The commercial case will be different for every property. Owners need to consider the cost of improvements against potential benefits such as improved marketability, reduced running costs, stronger occupier demand or longer-term asset resilience.

What Does this Mean for Hampshire Property Owners?

Hampshire and the wider South Coast have a diverse commercial property market, with a mixture of modern developments and established office and industrial stock.

Across locations such as Southampton, Portsmouth, Fareham, Eastleigh and the M27 corridor, owners need to consider ESG alongside local market conditions.

An older building does not automatically need major investment simply because newer properties are available nearby.

The important questions are:

Who is the target occupier? What competing properties are available? What specification does the market expect? And would improvements produce a commercial return?

Those questions should drive investment decisions rather than ESG targets in isolation.

What Should Property Owners Do Now?

Property owners should understand where their building currently sits within the market. Review the property’s EPC rating, energy performance, condition and specification, and compare it with competing properties. Consider what prospective occupiers are asking for and whether particular improvements could strengthen the property’s position.

For some buildings, the answer may be relatively simple improvements. For others, a larger refurbishment may make commercial sense. And in some cases, the existing building may already be well suited to its target market.

The Next Steps for Property Owners

ESG is becoming another consideration in how commercial property is occupied, managed, valued and traded.

It should not overshadow the fundamentals of commercial property. Location, rent, lease structure, condition and occupier demand remain critical.

However, energy efficiency and wider ESG considerations are becoming increasingly relevant to businesses and investors.

For commercial property owners across Hampshire and the South Coast, understanding how their building compares with competing stock can help identify both potential risks and opportunities.

Hellier Langston can advise commercial property owners across Hampshire and the South Coast on valuations, disposals, acquisitions, lease renewals, property management and wider asset strategy, helping owners understand how their property is positioned within the local market.

Speak to Hellier Langston to discuss your commercial property requirements.