Published: 05/03/2025
Rising energy costs are a growing concern for SMEs across the UK, particularly in the commercial property market. With businesses already navigating economic uncertainty, increasing utility bills can put additional pressure on tenants and landlords alike.
For SME owners, investors, and landlords, understanding how energy prices impact property costs, lease agreements, and business operations is essential. A skilled commercial estate agent can help businesses adapt to these challenges by finding energy-efficient properties and negotiating favourable lease terms.
1. Increased Operational Costs for SME Tenants
For businesses renting commercial spaces, rising energy bills can significantly impact daily operations. Offices, retail units, and industrial spaces require substantial electricity and gas, and these costs often form a major part of overheads.
Key Challenges:
- Higher Utility Bills: SMEs must allocate more budget to electricity, heating, and cooling.
- Reduced Profit Margins: Small businesses, particularly in retail and hospitality, face tighter financial constraints.
- Potential Downsizing: Some businesses may seek smaller or more energy-efficient spaces to cut costs.
In locations like Luton and Harlow, where SMEs dominate industrial and logistics sectors, rising energy costs make warehouse and manufacturing spaces more expensive to run. A commercial property agent can help tenants find properties with better energy efficiency ratings to mitigate these expenses.
2. Landlords Facing Pressure to Improve Energy Efficiency
Landlords in the SME commercial property market must now prioritise energy-efficient buildings to attract and retain tenants.
Key Challenges for Landlords:
- Upgrading Energy Performance Certificate (EPC) Ratings: UK regulations require commercial properties to have an EPC rating of E or higher.
- Retrofitting Older Properties: Many landlords must invest in insulation, LED lighting, and efficient heating systems.
- Competitive Market Pressures: Tenants are increasingly seeking eco-friendly buildings with lower running costs.
In areas like Watford and Chelmsford, where commercial office spaces are in high demand, landlords who invest in energy-efficient upgrades can charge higher rents and attract more stable tenants. A commercial estate agent can guide landlords on improvements that increase property value.
3. Shifts in Lease Terms & Service Charges
Rising energy costs are also influencing lease agreements between landlords and SME tenants.
Key Trends:
- Service Charge Increases: Landlords often pass higher energy costs onto tenants in multi-let buildings.
- More Flexible Lease Terms: Some landlords offer shorter leases or rent incentives to offset rising costs.
- Green Lease Agreements: These include clauses requiring landlords and tenants to improve energy efficiency collaboratively.
In Southend-on-Sea and Milton Keynes, where mixed-use developments are popular, landlords and tenants are renegotiating lease terms to address energy cost concerns. A knowledgeable commercial property agent can help SMEs secure the best possible terms.
4. Demand for Energy-Efficient Buildings
As energy costs rise, SMEs are prioritising energy efficiency when choosing business premises.
Key Features in Demand:
- Solar Panels & Renewable Energy Sources – Reducing reliance on traditional power grids.
- Smart Meters & Energy Monitoring Systems – Allowing businesses to track and optimise usage.
- Better Insulation & Heating Systems – Cutting down on wasted energy and excessive costs.
In Uxbridge and Cambridge, where tech start-ups and professional services dominate, there is a growing preference for sustainable, energy-efficient office spaces. A commercial estate agent can help SMEs find modern, low-energy properties.
5. Rising Demand for Renewable Energy Investments
With energy prices fluctuating, some commercial landlords and business owners are investing in renewable energy solutions.
Popular Investments:
- Solar Panels: Generating on-site electricity and reducing reliance on the grid.
- Battery Storage Systems: Storing energy for peak-time usage and cost savings.
- Wind & Hydro Energy: Less common but growing in large industrial estates.
In Crawley and Slough, where large business parks are prominent, some property owners are investing in solar energy to make commercial properties more appealing. A commercial property agent can help businesses explore properties with existing renewable energy solutions.
6. Government Incentives & Regulations
The UK government has introduced various schemes to help SMEs manage rising energy costs and improve efficiency.
Key Schemes & Regulations:
- Energy Bill Relief Scheme (EBRS): Providing discounts on business energy bills.
- EPC Regulations: Commercial properties must meet minimum energy efficiency standards.
- Business Rates Relief for Green Upgrades: Incentives for installing solar panels and insulation.
SMEs in Harlow and Luton are taking advantage of these schemes to upgrade their premises while managing costs. A commercial estate agent can provide advice on properties that qualify for government incentives.
7. Impact on Property Values & Investment Decisions
Rising energy costs are also influencing the value and desirability of commercial properties in the SME sector.
Key Market Trends:
- Higher Demand for Energy-Efficient Properties: Buildings with low running costs are attracting more buyers and tenants.
- Decline in Demand for Outdated Premises: Properties with poor insulation and inefficient heating systems are becoming harder to sell or lease.
- Shift in Investment Strategies: Investors are focusing on properties with strong EPC ratings and lower energy consumption.
In Milton Keynes and Cambridge, where commercial property investment is booming, energy-efficient buildings command higher sale prices and stronger rental yields. A commercial property agent can help investors identify properties with long-term value.
How Can SMEs Adapt to Rising Energy Costs?
🔹 Seek Energy-Efficient Premises – Work with a commercial estate agent to find properties with good EPC ratings.
🔹 Negotiate Lease Terms – Look for landlords offering rent incentives or energy-efficient improvements.
🔹 Invest in Renewable Energy – Consider solar panels or smart energy systems to reduce long-term costs.
🔹 Apply for Government Grants – Take advantage of schemes that help SMEs manage rising energy prices.
Conclusion
Rising energy costs are reshaping the SME commercial property market, affecting tenants, landlords, and investors alike. Whether you're looking to lease, buy, or upgrade a commercial property, energy efficiency is now a top priority.
Working with an experienced commercial property agent can help SMEs navigate these challenges, secure the best deals, and future-proof their businesses against rising utility costs.
Looking for energy-efficient commercial properties? Speak to a commercial estate agent today and explore the best options in your area.
