Energy Performance of Buildings Directive: What it is and what you need to know

Within the European Union, buildings account for nearly 40% of energy use and 36% of greenhouse gas emissions, making energy efficiency in real estate a critical focus for achieving the EU’s ambitious climate neutrality goal by 2050. As a result, the EU passed the Energy Performance of Buildings Directive (EPBD). Designed to modernize Europe’s building stock, the EPBD establishes stringent standards for energy performance, carbon reduction, and the adoption of innovative technologies.

What is the Energy Performance of Buildings Directive (EPBD)?

The EPBD is one of the European Union’s key policies for improving energy efficiency in the building sector. It plays a critical role in reducing environmental impact, promoting sustainability, and helping the EU achieve its goal of climate neutrality by 2050.

For commercial real estate professionals, the EPBD is more than just a regulatory framework—it’s a clear signal of where the industry is headed. By aligning with the directive, property owners and managers can future-proof their assets, meet market demand for energy-efficient spaces, and contribute to broader sustainability goals.

What the EPBD aims to achieve

The EPBD has several clear objectives, all centered around reducing energy use and carbon emissions in buildings. These include:

• Improving energy efficiency across new and existing buildings.
• Encouraging the use of renewable energy in the built environment.
• Lowering operational costs while addressing energy poverty.
• Driving innovation in construction, renovation, and building technologies.

Key components of the EPBD

To meet its objectives, the EPBD sets out specific measures that directly impact how buildings are designed, constructed, and maintained. Here’s what commercial real estate professionals need to know:

• Energy performance certificates (EPCs): One of the EPBD’s most visible requirements is using EPCs. These certificates give buildings an energy efficiency rating, typically from A (most efficient) to G (least efficient).

• Minimum energy performance standards (MEPS): The EPBD introduces MEPS to phase out poorly performing buildings over time. Buildings with low EPC ratings (typically F or G) may need upgrades to meet these standards.

• Nearly zero-energy buildings (NZEB): A cornerstone of the EPBD is the requirement for all new buildings in the EU to be NZEB. This means they must consume very little energy, with most of it coming from renewable sources.

• Smart readiness indicators (SRI): Another innovative aspect of the EPBD is the introduction of SRI. These measure a building’s capacity to use smart technologies to optimize energy use.

Why the EPBD matters for commercial real estate

From compliance with stricter energy efficiency standards to meeting the evolving demands of tenants and investors, the EPBD is shaping how properties are designed, renovated, and operated. For CRE professionals, understanding and adapting to this directive is critical for staying competitive in a rapidly evolving market.

Regulatory risks and market obsolescence

One of the most significant risks for commercial real estate is the potential for regulatory-driven obsolescence. As the EPBD introduces stricter benchmarks, buildings that don’t meet minimum energy performance requirements may become unlettable or unsellable in the future. For example:

• Restrictions on leasing or selling: In some EU countries such as the UK, properties with lower EPC ratings (such as F or G) are already facing restrictions on transactions. This trend will likely expand as more stringent EPBD measures are implemented.
• Loss of value: Inefficient buildings are increasingly seen as liabilities, both in terms of operational costs and market perception. Properties that fail to comply with EPBD standards may drop in value, making retrofitting or redevelopment essential to avoid financial losses. Additionally, properties with low EPC ratings tend to take longer to sell and sell for a lower value than their higher rated counterparts according to the Concerted Action of Energy Performance of Buildings.

To avoid these risks, CRE professionals must proactively assess their portfolios, prioritize energy upgrades, and plan for long-term compliance.

Financial implications of compliance

While upgrading buildings to meet EPBD standards requires upfront investment, the financial benefits of compliance often outweigh the costs. Here’s how:

• Increased property value: Energy-efficient buildings are more attractive to tenants and investors, leading to higher rents, reduced vacancy rates, and better overall valuation.
• Lower operating costs: Retrofitting properties with energy-efficient systems—such as modern HVAC, LED lighting, or renewable energy solutions—can significantly reduce energy bills and maintenance expenses.
• Access to green financing: Many governments and financial institutions offer incentives, grants, or favorable financing for energy-efficient renovations. By complying with EPBD standards, property owners can tap into these resources to offset upgrade costs.
• Future-proofing assets: Meeting EPBD benchmarks ensure properties remain compliant as regulations tighten further. This reduces the risk of costly retrofits later and positions assets to stay competitive in the long term.

How to comply with the EPBD

For commercial real estate professionals, compliance isn’t just about avoiding penalties—it’s an opportunity to modernize assets, reduce operating costs, and attract tenants and investors who prioritize sustainability.

Here’s a step-by-step guide to help you navigate compliance with the EPBD:

• Conduct an energy audit: The first step toward compliance is understanding your building’s energy performance. A commercial energy audit provides a detailed analysis of how energy is used and wasted within a property.

• Upgrade building systems: Once you’ve identified inefficiencies, the next step is implementing upgrades to improve your building’s energy performance. The scale of these improvements will depend on your property’s current condition.

• Obtain or improve your EPC: To obtain an EPC, hire a certified energy assessor to evaluate your property and issue the certificate. The process includes analyzing your building’s structure, systems, and energy use. If your property receives a low EPC rating (e.g., F or G), prioritize the upgrades identified in your energy audit. Even simple measures like installing smart lighting can help boost your rating. Plus, smart lighting solutions enhance tenant comfort too.

• Monitor and optimize energy use: Compliance with the EPBD isn’t a one-time effort—it requires ongoing monitoring and optimization of your building’s energy performance. Smart metering and other smart technologies can provide you with the data to make informed decisions and efficiently optimize your energy use.

• Plan for long-term compliance: The EPBD is part of a broader, long-term effort to decarbonize the EU’s building sector. Staying compliant means planning ahead and anticipating future updates to the directive.

• Leverage incentives and financial support: Upgrading a commercial property to meet EPBD standards can require a significant investment, but you can offset these upfront costs with government grants and subsidies, and green financing.

Embracing Proptech to reach EPBD compliance

Proptech solutions can streamline nearly every aspect of EPBD compliance—from conducting energy audits to tracking performance and implementing smart upgrades. These platforms enable building managers to:

• Monitor energy usage in real-time: Gain actionable insights into energy consumption patterns and identify inefficiencies.
• Automate building systems: Optimize heating, cooling, lighting, and other systems to save energy and reduce costs. Similarly, Proptech can enhance your operations through workflow automation.
• Track and improve EPC ratings: Use data-driven tools to assess current performance and implement targeted upgrades to boost EPC ratings.
• Plan for long-term compliance: Stay ahead of regulatory changes by setting up automated systems and alerts for energy performance requirements.

Introducing ProptechOS: Your partner in EPBD compliance

As the operating system for your buildings, ProptechOS transforms how you manage energy performance and sustainability. Instead of juggling multiple tools and datasets, you gain a single, integrated platform that simplifies compliance, streamlines operations and enhances asset performance.

With ProptechOS, you can:

• Break down data silos and gain a complete view of your building’s performance.

• Maximize the value of existing Proptech investments by integrating them into a unified system.

• Automate energy-saving measures to comply with EPBD standards.

• Leverage predictive analytics to make informed decisions about long-term compliance and asset optimization.

You can get started with ProptechOS for free today to see how it can help you achieve EPBD compliance and enhance the overall efficiency of your CRE portfolio.