Office Block Energy: Managing Costs in a Multi-Tenancy Building

A multi-tenancy office block has two distinct energy stories running simultaneously: the landlord’s energy spend on common parts, plant rooms, lifts, and external areas, and the tenants’ energy spend within their demised floors. Understanding which costs sit where — and who has the authority and incentive to manage each — is the starting point for any serious energy management programme in a multi-let building.

---

The landlord’s energy load

Landlord-responsible loads typically include: common area lighting (lobbies, corridors, stairwells, car parks), central HVAC plant serving common areas or supplied to floors on a shared basis, lifts, external lighting, and shared plant room equipment (boilers, chillers, pumps). In some buildings, landlords provide air conditioning to floors on an inclusive basis; in others, tenants install their own units within their demise.

The landlord’s energy procurement is often the least scrutinised of any commercial property energy spend. Institutional landlords with large portfolios may have sophisticated procurement strategies in place; smaller landlords with one or two commercial assets frequently roll over their contracts without competitive review. For a building with annual landlord energy costs of £40,000, a 15% procurement improvement is £6,000 per year — more than the yield improvement on many minor maintenance interventions.

---

Tenant energy and service charge recovery

How tenants pay for energy depends on the lease structure. In a fully inclusive lease, energy is embedded in the rent or service charge. In a directly metered arrangement, each tenant has their own supply and procures independently. In a landlord supply arrangement, the landlord buys energy in bulk and recharges tenants — which requires care around Ofgem’s regulations on unlicensed supply.

Landlords providing energy to tenants as part of an inclusive or recharged arrangement are technically acting as an energy reseller. Ofgem permits this without a supply licence only within defined parameters — broadly, where the energy is supplied within the same building or site, and the resale is not the primary commercial activity. Exceeding those parameters, or making a margin on energy resale beyond cost recovery, risks regulatory exposure. Landlords in this position should take legal advice on their specific arrangements if they haven’t already.

---

Submetering and accurate cost allocation

Without submetering at floor or demise level, allocating energy costs across tenants is estimated at best and contested at worst. Tenants paying a service charge energy allocation based on floor area — rather than actual measured consumption — have no incentive to manage their own energy use, and may be cross-subsidising heavier-consuming neighbours.

Installing MID-approved submeters at each demise allows cost allocation based on actual consumption, gives tenants visibility of their own use, and creates a more equitable service charge mechanism. The capital cost is typically recovered within one to two service charge periods through reduced disputes and improved consumption behaviour.

---

MEES and the landlord’s compliance obligation

From April 2023, landlords cannot let commercial premises with an EPC rating below E. The trajectory tightens: C by 2027, B by 2030 under current proposals. For a multi-tenancy office block, improving the EPC rating means either improving the building fabric and plant (landlord investment) or ensuring the common parts are assessed and rated separately from the tenanted areas.

For landlords with lease events approaching — renewals, regears, re-lettings — the EPC position is increasingly a commercial matter, not just a compliance one. Tenants, particularly larger corporates with sustainability reporting obligations, are incorporating EPC ratings into their lease requirements. A building stuck at D or E faces a narrowing tenant pool as ESG commitments become more widespread.

---

Green leases

Green lease clauses — provisions requiring landlord and tenant to cooperate on energy performance data sharing, improvement works, and sustainability reporting — are increasingly standard in institutional property transactions. For smaller landlords, green lease provisions remain less common, but the direction of travel is clear: tenants with net-zero commitments need data from their buildings to report accurately, and leases that don’t facilitate data sharing become a friction point at renewal.

Telnergy advises both landlords and occupying tenants on commercial office energy — procurement for landlord supply, tenant contract reviews, and portfolio consolidation where a business occupies multiple buildings. If you’re approaching a lease event or a contract renewal, talk to us first.

📱 WhatsApp: 07360 272168 | 📧 hello@telnergy.com | 📞 01202 028888 Telnergy Limited · Independent commercial energy consultancy since 2002 · Ofgem registered TPI · ADR Ref E3561 · CRN 04576876 · Christchurch, Dorset

---

FAQ

Can a landlord profit from reselling energy to tenants?

Within the Ofgem de minimis arrangements, a landlord can recover the cost of energy supplied to tenants within their building without holding a supply licence. However, making a commercial margin on the resale — charging tenants more than the landlord pays — risks being considered an unlicensed supply, which is a criminal offence. Landlords should ensure their service charge energy recovery is clearly structured as cost recovery only, with transparent calculations available to tenants on request.

My office block has a mixed EPC rating — how is MEES applied?

MEES applies at the individual letting unit level — the EPC for the space being let. If a floor or suite has its own EPC (as is common in multi-tenancy buildings), that EPC rating governs the lettability of that unit. The whole-building EPC doesn’t override unit-level ratings. Landlords should ensure EPCs are in place for each lettable unit rather than relying on a single building assessment, as the two can differ significantly.

How should EV charging in a car park be handled in a multi-tenancy building?

EV charging in shared car parks requires a decision on whether it’s a landlord-funded amenity (supplied from the landlord’s meter, recovered through service charge) or a tenant-funded installation (each tenant funds chargers for their allocated spaces, separately metered). The simpler approach for small buildings is landlord supply with consumption-based recharging via submeters. For larger installations, a dedicated EV charging management system with its own supply connection avoids the complexity of allocating charging costs through the main building meter.