Hidden Costs of Inefficiency: UK Retailers Forfeit £146 Million Annually to Leaky Buildings

Britain’s retailers are losing more than £146 million every year by failing to modernise their properties in line with net zero targets, according to new research.

The study, conducted by Mitsubishi Electric, revealed that outdated heating, ventilation, and air conditioning systems are wasting energy and driving up costs across one of the UK’s most energy-hungry industries.

Although many retailers recognise that sustainability can boost financial performance, nearly half of operations managers admitted that net zero is not treated as a priority. The reason, they said, is simple: the returns on investment often fall outside the short-term trading window that executives focus on.

Mitsubishi surveyed 500 retail facility managers, and the results indicate that the industry is falling dangerously behind the government’s climate goals. More than one in three shops is expected to remain non-compliant by 2030. That means thousands of stores risk becoming what experts call stranded assets: properties so inefficient that they become too costly, or even impossible, to rent out.

Heating, ventilation, and air conditioning (HVAC) alone account for as much as 60 percent of a store’s energy use. Yet only just over half of managers said they had upgraded their systems. The rest are still relying on old and inefficient equipment that drains budgets while undermining sustainability pledges.

Chris Newman, Zero Carbon Design Manager at Mitsubishi Electric, described the retail sector as both a challenge and an opportunity. He noted that retailers occupy approximately 16 percent of the UK’s non-domestic building space. That makes the sector a significant contributor to the country’s energy footprint, but also a place where real progress could be made if action is taken.

The report makes it clear, however, that structural barriers often hinder managers. More than a third said they had no control over budgets or decisions related to net zero projects. Forty-two per cent reported that they had received no clear guidance from senior leadership. Alarmingly, one in five said that their performance targets did not include net zero at all.

This lack of empowerment, the report argues, is creating a bottleneck at precisely the time when investors are demanding more on sustainability and when regulations such as the Minimum Energy Efficiency Standards are likely to become stricter.

Already, more than a third of managers believe that large portions of their estates could become stranded assets if the thresholds are raised. That fear is not theoretical. It is already having a financial impact. Annual energy losses linked to outdated HVAC systems are now estimated at £146 million, a figure that reflects money spent on equipment that should have been replaced with efficient alternatives.

Yet the report also stresses that modernisation does not need to be a daunting task. Many HVAC upgrades are relatively straightforward. In some cases, indoor and outdoor units can be replaced while keeping the existing pipework intact. Such measures could quickly reduce energy bills, bring buildings into compliance with increasingly stringent regulations, and safeguard the long-term value of retail properties.

For Newman and others in the field, the message is clear. Retailers that take decisive steps today can save money, enhance their resilience, and protect their assets. Those who delay will face higher costs, weaker competitiveness, and declining asset values. Consumers, investors, and regulators are all watching closely, and the cost of inaction is rising fast.