Jonathan Crawford, Director in DTZ’s Valuation team in Birmingham advises landlords to consider the impact the Energy Act 2011 will have on commercial property values:
“The implications of the Energy Act 2011 have been well publicised but essentially it will mean that landlords will no longer be able to legally let commercial and residential property which has a poor energy efficiency rating, i.e. an ‘F’ and ‘G’ rating.
“Although these measures do not come into force until April 2018, landlords, investors and occupiers need to act now and understand whether their properties will meet the required standard and, if necessary, take remedial action to maintain their value. The market is already seeing discounting on ‘F’ and ‘G’ rated buildings by prospective purchasers in anticipation of the 2018 deadline.
“Landlords and occupiers need to undertake Energy compliance due diligence if they currently own or occupy property which falls within the ‘F’ and ‘G’ EPC ratings to assess how to improve energy performance and achieve a higher rating. DTZ has carried out a number of EPC rating assessments and found that the industrial sector when compared with other market sectors has proportionately more properties with the lowest EPC ratings.
“One of the key factors which impacts a building’s EPC rating is high energy usage. Property owners can implement measures to reduce energy consumption, such as installing more energy efficient mechanical and electrical fitments which can help to improve a property’s rating.
“To assist landlords, investors and occupiers who don’t have the capital to make energy efficiency improvements to their properties, the government recently announced a ‘Green Deal’ loan scheme to fund energy efficiency improvements, at an average interest rate of 7.5%.
“Lenders who are financing loans beyond 2018, along with their borrowers, need to understand the risks on properties as part of their assessment of suitability for loan security. Consideration of any improvement costs to be incurred by borrowers and an increased risk of income voids beyond 2018 needs to be taken into account when lending on properties which currently have poor EPC ratings.”