No longer a thing of the past, sustainable workplaces are in here, and here to stay. Why? The UK government is positioning itself to be a world leader in the fight against climate change. It has committed to becoming Carbon Net-Zero by 2050. So, with a green revolution on the cards, inefficient industries better watch their backs….
Enter commercial property:
The less good news…while Boris may be saving the world, real estate is in some pretty hot water. The built environment is predicted to consume around 40 per cent of global energy annually (that’s over 20 percent of international carbon emissions).
What’s being done about it?
Greta is on school strike, people are protesting, and the UK’s Committee on Climate Change is fighting greenhouse gases. When it comes to real estate specifically, the Committee has stated that the ‘Minimum Energy Efficiency Standards’ (MEES) (2018) are not strong enough to achieve the 2050 carbon emission targets. As a result, the UK government has proposed that commercial property must have an Energy Performance Certificate (EPC) rating of B or above by 2030.
What does this mean for my property?
It’s a great question. While stranded assets (i.e., old properties where energy-efficient investment would not result in payback within 7-years) are likely to be exempt from this regulation, market dynamics are rapidly changing to price-in the value of sustainable investments. In a market increasingly governed by sustainability we believe a property’s EPC rating will soon dictate its market value. In short: it will pay to be green.
We have studied EPC data from 2008 – 2019 (check out the graph below) and the findings show that over 85% of all commercial properties do not meet the standard of EPC B+.
Energy Performance Certificate (EPC) recap:
“EPC’s are a certificate (and associated report) that sets out the energy efficiency rating of a property and contains recommendations for ways in which the efficiency of the property could be improved. Virtually all domestic and non-domestic buildings sold, rented out or constructed since 2008 must have an EPC. An EPC may also be required when a property is altered in particular ways.”
As we become increasingly aware of the carbon impact of real estate there is a growing pressure to strengthen MEES legislation. The benefit of this legislation would not only reduce carbon emissions, but it would also provide landlords with a strong incentive to increase their energy efficiency. And by doing so, the government estimates that UK businesses could save up to £6bn per annum from 2030. #ShowMeTheMoney.
The UK has committed itself to Carbon Net-Zero by 2050 which means we should expect higher minimum standards for commercial property, most notably concerning their EPC ratings.
As tempting as it is to bury your head in the sand and ignore these changes, sustainability is not a fad. Landlords must plan how to raise their buildings EPC minimum standards or risk getting left behind.
Get in touch_
All a bit overwhelming? Don’t know your EPCs from your ABCs? Fear not. Get in touch with TSP to discuss how we can help transition your portfolio for more sustainable long-term returns.
Keen to learn more?
Want to see a case study on turning an old warehouse building into a sustainability hero with an EPC B rating? Check out our blog here.
What’s carbon neutral and why should I care? Our blog about why TSP become carbon neutral in 2020 might help with your questions.
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