Commercial EPCs… blessing in disguise?
I was talking to a commercial agent earlier this month about the ‘recent‘ changes in Government legislation surrounding Energy Performance Certification. Since April 1st2018 it has been unlawful to let a commercial property with an EPC worse than E, unless the property in question falls into one of the exemption categories. We had known that this legislation was on its way since 2015, and I remember thinking at the time that this would lead to a gradual influx of commercial refurbishment projects in the lead up to April 2018. I was in fact completely wrong in this assumption.
According to the Government’s own figures, up to one third of commercial properties (in 2015) would have failed to meet the now minimum standard. This should translate to a significant number of properties across the UK.
It is more than likely that with the long-term nature of many leases, landlords generally have chosen to do nothing until these came up for renewal, necessity being the mother of invention. But even so, I would have expected to have received some enquiries over the past few years.
The exemptions to this appear to be fairly far-ranging, including, listed buildings, small premises, temporary structures and workshops. Others may have been simply improved enough by installing PV, when the FIT was a real incentive, and / or energy saving LED lighting, or other ‘light touch’ updates.
The upshot of this legislation is that landlords could gradually find their building stock reducing in lettable value if they aim for EPC ratings that are ‘marginal’ rather than ‘good’.
For some buildings it will be, in the longer term, more cost effective and practical to demolish and start again, and it’s likely that some properties have fallen off the radar in this manner. We are also aware that permitted development rights have seen some lower quality commercial properties turned over to residential, with much greater value being able to be realised from them as a result. Such issues have seen the availability of commercial property in our city centres being gradually reduced.
Regardless of this, we know from personal experience how some very poorly performing commercial properties can be totally reinvented with a carefully considered program of improvement works, so that they do not merely meet minimum standards but perform in a truly energy efficient way. This will become increasingly important as potential future tenants place greater emphasis on the energy use of their premises, both as a result of their own corporate policies and the cost of that particular business overhead. Don’t forget also, this is about providing good quality working environments for staff with the associated reduction in sickness rates and increase in productivity.
Our own personal experience of working in a refurbished, and now very energy efficient, 1970s concrete-framed office building, is that heating bills can be very low, energy demands can be largely met by way of PV and the working environment can be very pleasant. As an organisation we enjoy much lower staff absence rates than the UK average.
However, we equally know from experience that the added benefit that a proactive approach provides is very difficult to both prove and then also quantify, whilst the costs are relatively easily predicted. No doubt time will tell, and the response, as always, will be reactive rather than proactive.
The conclusion? it is still very early days in terms of UK commercial property reform, but the change will have to gradually come. When it does, landlords can choose to be proactive and create truly desirable workplaces that they can let easily and at a premium, or scrape in with a cynical, minimal approach that might later prove to be a false economy. And then, what next? A minimum requirement for an EPC rating of D? C? We will have to watch this space, but it is only headed one way, so why not be an early adopter?