Commercial property investors and occupiers should start planning energy efficiency upgrades to ensure their assets meet minimum band ‘E’ standard or potentially face being unable to lease them, according to DTZ.
DECC has clarified details of the regulations which will be imposed on the non-domestic property sector under the Energy Act 2011, which seeks to improve the energy efficiency of the UK’s building stock.
Around a quarter of all UK building stock falls into Energy Performance Certificate categories ‘F’ and ‘G’ and the clarity of DECC allows organisations – both landlords and tenants – to prepare for necessary changes which must be completed by 2018. Failure to act could result in being unable to lease the asset and fines up to £150,000.
Jo Williams, Director in DTZ’s Project & Building consultancy team in Bristol, said: “The absence of detail has caused uncertainty in the market so the clarity is very welcome. Owners of non-compliant buildings must act or face a twin burden of lost income from an asset they are unable to lease and diminishing capital value.
“The effects are being felt already with occupiers stipulating minimum performance ratings for new buildings and this will only increase. In essence you are looking at an emerging two-tier market with poorer performing stock being marginalised even before the regulations come into force unless investors and occupiers take steps to prepare for implementation.”
The Energy Act provides a framework to facilitate the upgrade of the UK’s worst performing buildings. DTZ anticipates the clarification will have a number of knock-on effects. On the occupier side, energy performance of buildings is likely to become an issue at rent reviews while lease renewals and dilapidations will also be affected.
Similarly, investors will add Energy Act compliance to their risk analysis of new purchases and valuations will also be reviewed closely in light of the impending regulatory deadline.
Jo Williams added: “For commercial property owners and occupiers, improving the operational performance and efficiency of their buildings has long been a primary objective. Improving energy performance is now an essential part of that agenda.”
