Research by Jones Lang LaSalle shows that more than 50 per cent of Bristol’s city centre offices that are on the market are at risk of falling into disuse unless improvements are made in the next five years to ensure they meet new environmental regulations.
Proposed new legislation comes into force in April 2018 under the UK Energy Act 2011 which will make it unlawful for landlords to lease space, and for occupiers to assign leases or sublet, in buildings with an energy performance certificate (EPC) rating of F or G. An EPC presents the energy efficiency of a property on a scale of A to G. The most efficient properties are in Band A.
According to Jones Lang LaSalle’s latest research report, the biggest issue facing the UK’s office market is the risk of office space becoming out-dated and losing value in the face of tighter environmental regulations – known in the property industry as building obsolescence.
In Bristol, almost 20% of the largest available office buildings in the city centre have an EPC of F or G meaning they would be obsolete if the 2018 regulations came into force now.
A further third of available properties have a rating of E which are at risk of falling into the F or G category when their next EPC assessment is due as the scoring process is expected to become tighter making it likely that their rating will be downgraded.
However, this does present an opportunity for savvy investors and proactive occupiers to capitalise by acting quickly to refurbish their buildings and ensuring they are future-proofed.
Ben St. Quintin, who advises on sustainability issues in the Property and Asset Management team at Jones Lang LaSalle’s Bristol office, said: “This research covers properties currently on the market in Bristol rather than all properties but it is indicative of an emerging issue. We anticipate that values on stock at risk of becoming obsolete will depreciate as the 2018 deadline approaches, with poorer quality buildings likely to display longer void periods, reduced rental growth and higher rent free periods offered to potential occupiers.
“Now more than ever, sustainable refurbishment and proactive asset management will be required, with an opportunity for the investment shrewd to mitigate these risks.
“We encourage landlords to get to grips with the legislation now and the implications it could have on their buildings. There may be some simple actions to be taken now which will minimise their exposure to the risk of building obsolescence and help increase rental value now too.”
