November 5, 2019
Rob Hamilton, senior project manager at George F. White, tells us why it’s essential the commercial rented sector has a properly planned and costed strategy to address Minimum Energy Efficiency Standards
In June of this year, the UK became the first major economy to pass laws to bring all greenhouse gas emissions to net zero by 2050. It’s an ambitious target that’s going to reach into all sectors.
From tackling the challenge of decarbonising our transport and heating systems, to increasing our power generation from renewables, there is a need for coordinated action to ensure that clean growth forms a key part of our industrial strategy.
More ambitious still, in April of this year, Newcastle followed Durham and Sunderland in declaring a climate emergency and setting its own target to be carbon neutral by 2030.
There is clearly an aim to lead from the front when it comes to tackling climate change. The North East is already a net exporter of electricity, producing more power than it uses, but as a region we are still seeking to exceed the national targets.
When apportioning blame to the ‘climate emergency’, it is easy to look to big industry; however, buildings in the UK are responsible for 40 per cent of the total carbon emissions and account for 40 per cent of the national energy demand. Increasing energy efficiency in buildings has been a vital part of the Government’s strategy to reach their emissions targets. It should be clear to everyone that the easiest route to net zero is to simply use less energy.
Improvements in the commercial rented sector have been targeted through the Minimum Energy Efficiency Standards, introduced in April of last year. The ‘MEES’ regulations state that properties with the lowest energy ratings, F and G, must carry out measures to improve the rating of the property before it renews or enters into a new tenancy. These standards will also apply to all existing tenancies from 2023, capturing long-term commercial leases. We estimate that 20 per cent of commercial property in England and Wales
will fall below this standard, and the sector has been described by the Department for Business, Energy and Industrial Strategy as a “huge untapped area for improvements.”
Although the MEES regulations do not apply
to the sale of properties, we have seen a number of lenders increasingly concerned by low EPC ratings, and in some cases have required that the minimum standards are exceeded with a rating of a D for finance to be made available. This is
to safeguard against the expectation that the standards may be raised further to a D rating by 2025, and a C rating by 2030.
Property owners must look to their existing portfolio to understand their immediate,
and longer-term exposure to potential costs associated with required improvement measures. A properly planned and costed strategy will ensure that the benefits of improvements can
be maximised, rather than aiming for minimum compliance or using exceptions as a short-term fix.
Properties marketed with an EPC rating just above the threshold may become unattractive to potential tenants with an increasing emphasis on ‘green credentials’, and a realisation that more efficient buildings can significantly reduce running costs.
There are many ways to improve EPC ratings, from installing efficient heating and cooling systems, to replacing lighting following a properly calculated lighting design. We would encourage all property owners to seek professional advice early to fully understand the opportunities available.
George F. White
Please get in touch if you would like any advice on energy efficiency, renewable generation, or would like any information on our other commercial services.
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