Beyond the façade: what investors need to know about building safety risk

Since Grenfell, how has the conversation around cladding and external wall systems changed among investors, lenders and occupiers?

The shift has been significant. Before Grenfell, cladding was largely seen as a design or specification issue. Today, it sits at the centre of investment risk.

The Building Safety Act 2022 and the creation of the Building Safety Regulator have introduced much clearer accountability for higher-risk buildings. Fire safety is no longer just a technical compliance exercise – it is a governance and value issue that investors, lenders and insurers scrutinise closely.

For those who do not follow the legislation closely, what do asset owners need to understand?

The key change is responsibility. Dutyholders must now demonstrate that buildings are safe, not simply assume compliance. The Gateway regime, particularly Gateway 2, requires far more detailed information before works can proceed. That has led to longer approval periods and, in some cases, programme delays.

For asset owners, that means regulatory timelines and documentation quality can directly affect business plans, refinancing and exit strategies.

Why does uncertainty around cladding have such a significant impact on property value and transaction risk?

Value is closely linked to certainty. If buyers cannot quantify remediation cost, approval timelines or insurance implications, they price in risk.

We see transactions stall where external wall assessments are incomplete or historic information is missing. Questions around funding routes or eligibility for remediation schemes can also create delays. If a building cannot be easily insured, sold or refinanced, that affects liquidity and therefore value.

In short, uncertainty around fire safety translates directly into financial uncertainty.

What misconceptions do investors or tenants often have about cladding risk?

One misconception is that risk is binary. In reality, fire safety is systemic. It is about how materials, detailing, compartmentation and management work together.

Another is the assumption that one document provides assurance. An external wall assessment is important, but it is only part of the picture. Buyers need to understand the building’s overall fire strategy and whether that strategy is being maintained in occupation.

There is also confusion between a building that is genuinely unsafe and one that is simply poorly documented. That distinction is critical when assessing value.

Can a building be compliant on paper but still present risk in practice? What should buyers look for in Technical Due Diligence?

Yes. Compliance reflects a defined standard at a point in time. Safety depends on how the building performs as a system.

During due diligence, investors should examine whether the fire strategy aligns with the as-built condition, whether intrusive investigations have identified defects, and how the façade interfaces with balconies, insulation and services. Understanding likely remediation pathways, costs and timescales is equally important.

At Hollis, we support clients from acquisition through to remediation and ongoing fire safety management. The objective is not simply to identify problems, but to define practical, proportionate solutions.

There is pressure to accelerate cladding remediation. How do you ensure that speed does not compromise quality?

There is a clear political drive to complete remediation on higher-risk buildings within defined timeframes. However, rushing work carries its own risk.

The industry is facing a shortage of experienced fire engineers and façade specialists. Cutting corners or reducing oversight can undermine safety and create further defects.

The right balance requires robust design, clear documentation and competent multidisciplinary teams. Remediation must be both timely and technically sound.

What are the risks of treating cladding remediation as a tick-box exercise?

If remediation is treated purely as façade replacement, wider issues can be missed. Fire safety does not sit in isolation. We are also seeing rapid innovation in areas such as solar PV, battery storage and modern methods of construction. Regulations can lag behind these technologies.

A holistic approach considers how all systems interact. True resilience comes from understanding the building as a whole, not just one component.

If you were advising an investor considering a residential block with uncertain cladding, what would you ask first?

I would focus on three areas: the defined fire strategy and how the façade supports it; the quality of evidence around the external wall system; and the realistic remediation pathway, including regulatory approvals and programme duration.

Those answers provide a clearer view of cost exposure and timing risk, which are central to value.

What does good building safety governance look like in 2026?

Good governance means clarity of roles, accurate records, regular review of fire risk assessments and proactive engagement with remediation where required.

Building and fire safety is now central to how the market assesses assets. Owners who understand their risk, document it clearly and act decisively are far better placed to protect both tenants and long-term asset value.