When an A isn’t an A: Why EPCs are failing commercial real estate.
With the revised Energy Performance of Buildings Directive (EPBD) just around the corner, EPCs are getting a lot of attention. And rightly so. The system has been around since the late 1990s, which makes them a mainstay of our industry, but maybe, seeing as they've been around – and untouched – since the late 1990s, it's time for an update. Something to bring them into this century, at least.
The EPBD is turning EPCs from a relatively passive compliance label into an active regulatory instrument, one that will increasingly influence what can be operated, upgraded, financed, and owned. And yet, in Danish commercial real estate, critical decisions continue to be based on EPCs despite repeated documentation showing that a significant share contains serious errors.
At the same time, energy performance has gradually moved closer to the financial core of the industry. Regulation is tightening, banks are embedding climate and transition risk into credit decisions, and investors are demanding credible net-zero pathways. EPCs are no longer a side parameter – they can materially affect value, liquidity, and access to capital.
The scale of the issue is starting to become measurable. A 2026 analysis backed by DTU professor Henrik Madsen and COWI, estimates that at least 7,500 commercial buildings could face renovation requirements under the EPBD – despite not having a meaningful energy problem. The total cost of that misallocation is estimated to be somewhere between DKK 11 and 13 billion. Far from peanuts.
It's a contested estimate –and the EPBD does include dispensation clauses that are intended to prevent plainly uneconomic renovations from being mandated. But the concern behind the numbers is harder to dismiss: that a manually producted, static, and document-based system built on theoretical calculations, rather than actual consumption data, will direct billions of kroner toward the wrong buildings.
In this article, we look at how the Danish EPC, in its current form, has become a structural bottleneck for commercial real estate, and why the gap between what the market now requires and what the system delivers is becoming impossible to ignore. What the solution is, well, we're working on something, but one thing's for sure – a change has got to come.
Why EPCs matter more than ever
EPCs are often treated as neutral facts, something to reference, file away, and build upon. But when Danish authorities and industry bodies have tested their reliability, the results have been less than ideal.
Control efforts over the past decade show that a significant share of certificates contain errors. Earlier reviews found that roughly one-third of inspected EPCs carried the wrong label. Even after corrective initiatives, authorities have acknowledged that around every fifth certificate still contains serious faults. A more recent study from 2026 analysed approximately 105,000 Danish buildings and found that inconsistencies across multiple EPCs for the same building are typical.
Industry reports continue to point to the same structural issues: incorrect registrations, renovation proposals that are technically or financially unrealistic, and expected savings that fail to materialise once measures are implemented.
This isn’t a marginal quality problem. It’s a reliability issue in an instrument that underpins due diligence, asset-level energy strategy, portfolio decarbonisation planning, and – increasingly – access to green financing.
When one in three classifications is wrong, you can't argue that it's isolated inaccuracies. It’s structural uncertainty that impacts decisions in multiple directions, like overpaying for assets that appear efficient on paper, underestimating future capex for buildings that will fall below regulatory thresholds faster than expected, or misjudging transition risk precisely as lenders and investors become more sensitive to it.
The question is no longer whether EPCs are perfect. No metric is. The real question is whether a system with error rates at this scale is robust enough to carry the strategic, financial, and regulatory weight now placed upon it.
A 1990s tool in a 2020s market
The EPC was introduced in Denmark in the late 1990s as a basic informational tool. Its purpose was to give buyers a rough sense of expected energy consumption and encourage a limited set of standard efficiency upgrades.
Over time, regulatory pressure increased. EU directives were strengthened, targets tightened, and instead of redesigning the system, the response was largely incremental. The scheme expanded to cover more building categories, including non-residential assets, with differentiated rules and calculation methods. It evolved, but the core logic remained unchanged: assess a building, assign a label, and document theoretical performance under standardised assumptions.
Meanwhile, commercial real estate evolved. Energy performance moved from a soft sustainability topic to a material factor in lending, valuation, regulatory compliance, and transition risk. Banks came under pressure to assess climate risk at asset level, investors expect transition pathways and asset managers must plan upgrades across entire portfolios under tight capital constraints.
But the EPC still behaves like a transactional certificate – something attached to a sale or uploaded to a register. It was never designed to answer the questions that now define commercial decision-making. And this is where we find the core tension. EPCs have been given a strategic role they were never built to perform. As the stakes rise, that mismatch is becoming more visible, more costly, and harder to ignore.
Five structural problems that hold EPCs back
Even if every EPC were calculated perfectly, the system would still struggle to support modern commercial real estate. Its design no longer aligns with how assets are operated, financed, and decarbonised.
1. It is static in a dynamic world
By design, the EPC describes a building as a theoretical asset, not as it is actually used. When a certificate remains unchanged for years, it drifts away from the building’s present risk profile. The issue is not that EPCs are theoretical – it is that they are increasingly used in decisions where current performance and resilience matter.
2. It sends increasingly distorted signals
At heart, the EPC still looks at buildings through a rear-view mirror. It assumes stable energy prices, predictable systems, and incremental improvement. That no longer reflects reality. Energy prices fluctuate, electricity is decarbonising, and carbon is becoming a real cost. In this context, EPCs can reward choices that improve labels without reducing emissions or future-proofing assets, leaving owners exposed to rising costs and tighter regulation.
Gitte Gylling H. Olesen, a director at COWI, has called publicly for the systematic use of actual consumption and usage data alongside EPC calculations – a view shared by DI Ejendom and, increasingly, by academic researchers. The issue isn't that theoretical modelling has no value. It does. But a certificate that says nothing about how a building is actually operated is limited as a decision-making tool, and as a basis for regulatory enforcement.
3.It was built for individual buildings, not portfolios
EPCs assess buildings one by one, as individual assets. That was intentional, and it made sense in a market dominated by individual owners. But institutional investors manage portfolios, not single buildings. At that level, the issue is not whether EPCs exist, but how well their insights translate. A collection of disconnected certificates offers limited help in understanding where regulatory risk concentrates, which assets are nearing minimum standards, or where scarce capex will have the greatest impact. Even in countries like Denmark, where EPC data is extensive, EPCs were never designed to function as portfolio-level signals.
4. It promises action, but rarely delivers strategy
Many EPCs include estimates of investment costs, energy savings, and payback times, but these figures are often generic and uneven in quality to support real decisions. Measures appear as isolated actions, not as coherent pathways shaped by risk, timing, and financing. EPCs speak in kilowatt-hours; asset managers decide in cash flow. The bridge between the two exists on paper, but in practice, it remains weak.
5. It is still produced largely by hand
Despite the industry embracing digitalisation – albeit slowly – the EPC is still created through a fundamentally manual process. An energy consultant must physically visit each building and collect a long list of technical inputs, one by one. These inputs are then interpreted, modelled, and reported through a largely human-driven workflow. At a small scale, this made sense, but with portfolios and institutional ownership, it introduces cost, delay, inconsistency, and an unavoidable vulnerability to human error.
Taken together, these limitations explain why the EPC feels increasingly strained under the weight of modern expectations. It is asked to guide billion-kroner investment decisions, used to assess regulatory survival, and is fed into lending models, ESG reporting frameworks, and transition plans. The problem is; it was never designed to do any of those things.
Why this matters now
The importance of energy performance has shifted. It mattered, back in the late 90s and early 00s, but it was rarely decisive. Now, regulation, capital markets, and investor expectations are now aligning around energy performance. Minimum standards are moving from policy to enforceable thresholds, banks are embedding transition risk into core frameworks, and investors are translating net-zero commitments into concrete portfolio plans. Energy performance is hot.
This is why EPCs now carry a weight they were never designed to bear. They are used as regulatory signals, credit inputs, evidence in transition strategies, and valuation markers – while remaining static, assumption-heavy, and manually produced.
It's worth being clear about what EPCs can still do well. Industry voices – including Synergi, a Danish energy consultancy body – point out that the EPC remains the only tool that allows objective, standardised comparison across buildings, independent of how they happen to be run. A bad EPC, they argue, signals a building quality problem. A good EPC with high actual consumption points to operations, management, or usage – a different problem, addressed elsewhere in the EPBD's requirements for building automation and control systems.
And that's a fair distinction. The EPC was designed to assess the building, not the behaviour inside it. The problem isn't that EPCs measure the wrong thing – it's that they're now being asked to do far more than what they were intended to do. Like guide billion-kroner renovation programmes, serve as credit inputs, to anchor transition strategies – and to do all of that while remaining static, manually produced, and – in a significant share of cases – factually incorrect.
Defending the EPC as a useful tool and acknowledging that it wasn't built for this level of strategic weight are not contradictory positions. The industry largely holds both at once.
What a next-generation EPC could look like for commercial real estate
No one should, and is, arguing that the EPC should disappear, but it does need to evolve. Thanks to pressures such as the EPBD, commercial real estate faces one of the largest capital reallocations in its history: decarbonising and future-proofing building stock. That requires instruments that are dynamic, comparable, auditable, and financially legible – systems that show not just where assets stand today, but where they are heading and what different futures cost.
The debate is no longer whether buildings must become more energy efficient. That much is settled. The real question is whether the systems used today to measure, manage, and finance that transition are strong enough for the scale, speed, and capital intensity now required.
In the years ahead, the winners in commercial real estate will not be those with the best labels on paper, but those with the clearest, most actionable control over what those labels actually mean for their portfolios.
So, what does all this mean for the faithful EPC? It means it needs to evolve, from snapshot to signal, from PDF to platform, from compliance artefact to active decision layer in how assets are financed, upgraded, and valued.
How? Well, that's another story for another time.
