EPBD 2024: Why ”
” Minimum Standards Are Not Enough
With the amended EU Energy Performance of Buildings Directive (EPBD) 2024/1275, the pressure to take action in the commercial real estate sector is increasing. The directive not only tightens the regulatory framework but also changes the economic valuation of real estate. Properties with poor energy performance are thus facing pressure from several fronts: rising expectations regarding ESG performance, changing financing dynamics, and growing risks to marketability and value appreciation.
Many property portfolios are currently exhibiting an understandable reflex: When regulatory pressure increases, renovation measures simply have to be initiated. However, implementing individual measures today merely to meet minimum standards does not automatically improve a building’s long-term viability. The key factor is whether a property will still be economically viable, financially feasible, rentable, and technically compatible in a few years’ time.
The reflex to restructure falls short
Before taking the first step, therefore, three questions should be clarified:
- What is the outlook for this property within the real estate portfolio?
Not every building needs to be developed to the same target standard. The key factors are the role a property is expected to play in the future and what realistic prospects for its use exist. - Is a renovation enough, or is a more profound transformation needed?
In commercial buildings, energy-related weaknesses often go hand in hand with functional shortcomings, such as issues with building systems, flexibility, space efficiency, or heat supply. - When does a particular procedure make economic sense?
The timing of investments, maintenance cycles, funding frameworks, lease agreements, and operational conditions must all be considered together.
Strategic Challenge
Especially when it comes to commercial buildings, it is not enough to consider individual measures in isolation. What matters is the interplay between energy performance, the initial technical condition, future use, investment needs, and the risk of stranded assets.
Against this backdrop, a robust decision-making process is needed. In our view, the best approach involves three steps:
- Creating Transparency
The first step is a thorough assessment of the current situation. This includes the technical baseline, consumption data, structural limitations, future usage plans, and investment needs. - Evaluating Options for Action
Rather than considering individual measures in isolation, restructuring and transformation pathways should be developed and made comparable—taking into account regulatory pressure, economic viability, and the risk of stranded assets. - Prioritizing and Managing Measures in a Targeted Manner
It is crucial to schedule investments so that Capex, timeframes, technical implementation, and operational requirements align.
The EPBD 2024 definitively establishes energy-efficient retrofitting as a strategic management task. For owners and investors, it is not enough to simply respond to individual requirements. What is needed is a robust decision-making framework that turns regulatory pressure into a viable transformation strategy. Those who establish transparency early on, carefully evaluate options, and strategically manage measures can reduce risks and ensure buildings are fit for the future.
For more on this topic: A detailed article by Jörg Brodehl and Bernhard Schochenmaier has been published in *Immobilienwirtschaft *.
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