The Growing Impact of Sustainability and ESG on London’s Letting Market

Introduction: A New Era for Luxury Lettings

London’s property market has long been synonymous with luxury, heritage, and prestige. But in 2025, there’s a new must-have feature for high-end rental properties: sustainability. Increasingly, high-net-worth tenants, corporate relocation clients, and investors are prioritising eco-conscious properties, reshaping the way landlords market and manage their portfolios. What does this seismic shift mean for landlords and letting agents in London? How can property owners future-proof their investments while attracting affluent, environmentally conscious tenants?

Sustainability: A Game-Changer in Prime London Rentals

The days when sustainability was a niche concern are over. In prime London postcodes, from Mayfair to Chelsea, Knightsbridge to Hampstead, the most desirable rental properties are no longer just about opulent interiors and concierge services. Today’s high-calibre tenants are asking:

• Is the property energy-efficient?

• Does it have smart heating and cooling systems?

• Are eco-friendly materials used in its construction and design?

• Does the landlord demonstrate social responsibility in property management?

What is ESG and Why Does it Matter to London Landlords?

ESG – Environmental, Social, and Governance – has shifted from being a corporate buzzword to a concrete decision-making factor in property investment. For landlords managing prime properties, ESG isn’t just about being seen as ethical – it’s about meeting tenant expectations, complying with upcoming regulations, and safeguarding property value.

Environmental factors include reducing carbon emissions, improving energy efficiency, and minimising environmental impact. Social factors cover tenant well-being, fair treatment, and ethical supplier choices. Governance factors relate to transparent financial management, fair dispute handling, and compliance with legal obligations.

The Legal and Regulatory Push for Sustainable Rentals

London landlords cannot afford to ignore the legal implications. In line with the UK’s Net Zero 2050 target, the government has steadily introduced stricter energy performance requirements for rental properties.

• Minimum EPC (Energy Performance Certificate) Ratings: By 2028, all rental properties – including prime and luxury homes – are expected to have a minimum EPC rating of C.

• Retrofit and Upgrade Requirements: Properties that fail to meet energy efficiency standards may become unlettable, no matter how prestigious their location.

• Tenant Demand: Tenants, particularly corporate tenants from environmentally-conscious sectors, now expect EPC data and sustainability credentials to be part of property listings.

Ignoring these shifts could mean losing access to the best tenants, suffering reduced rental yields, and facing regulatory fines.

Corporate Relocation Clients: Leading the Green Charge

Corporate relocation clients, who form a significant proportion of high-end tenants in London, are especially tuned into sustainability and ESG factors. Multinational companies with ESG commitments are requiring that their employee accommodation meets certain environmental standards.

For landlords, this means that if your luxury apartment in Belgravia lacks energy efficiency measures, you could lose out to a more eco-friendly rival in Marylebone.

Key Sustainable Features Tenants Want in 2025

• High EPC Ratings: Minimum C, but ideally B or A.

• Smart Home Systems: Tenants want control over heating, lighting, and security via smart apps.

• Sustainable Materials: Reclaimed wood flooring, non-toxic paints, and low-impact insulation all appeal to eco-conscious renters.

• Electric Vehicle Charging Points: Particularly in houses with driveways or secure parking facilities.

• Green Roofs and Living Walls: Bringing biodiversity into urban homes.

• Renewable Energy Sources: Properties with solar panels or green energy suppliers stand out.

Growing importance of of access to electric vehicle charging ports.

Why Sustainable Properties Command Premium Rents

Data consistently shows that energy-efficient homes let faster and achieve higher rents than poorly performing properties. In fact, a study by Knight Frank found that rental properties with EPC ratings of A or B let for up to 10% more than similar properties with lower ratings.

For London landlords, the message is clear: Invest in sustainability to maximise your rental income and future-proof your property’s value.

Case Study: The Green Penthouse in South Kensington

A recent example highlights this shift. A South Kensington penthouse underwent a sustainability retrofit, adding:

• Triple glazing

• Solar panels

• Energy-efficient underfloor heating

• A smart energy monitoring system

The result? The property achieved 15% above the local rental average, attracted interest from corporate clients, and secured a long-term tenancy with a sustainability-focused finance executive.

The Cost of Ignoring Sustainability

The risks of ignoring sustainability are mounting:

• Void Periods: Properties with poor energy efficiency could be harder to let.

• Reduced Valuation: Low EPC properties could suffer downward pressure on valuations.

• Future Saleability: Prospective buyers and their lenders are increasingly considering energy efficiency during purchase negotiations.

• Legal Action: Failure to meet minimum EPC standards could result in fines and restrictions on letting.

What Can London Landlords Do Today?

1. Commission an EPC Review: Identify where improvements can be made.

2. Plan for Sustainable Upgrades: From insulation to heating systems, even small changes can boost efficiency.

3. Document Your ESG Credentials: Keep records of all green upgrades, certifications, and supplier choices.

4. Stay Ahead of Regulations: The lettings landscape will only become more regulated, so proactive compliance protects your income and asset value.

Partnering with a Forward-Thinking Property Manager

Sterling Regency recognises that London’s luxury rental market is evolving. The bespoke property management services offered by Sterling Regency are tailored to help landlords future-proof their portfolios, navigate complex ESG regulations, and attract the most desirable tenants.

Sterling Regency works closely with landlords to:

• Identify sustainable upgrade opportunities.

• Promote properties’ green credentials to high-net-worth tenants.

• Ensure full compliance with evolving UK regulations.

Final Thoughts

The rise of sustainability and ESG in London’s prime rental market is not a passing trend – it’s the future of luxury lettings. For landlords who embrace this shift, the rewards are substantial: higher rental yields, more desirable tenants, and future-proofed investments. For those who ignore it? They risk being left behind.