According to new research by global real estate services, Cushman & Wakefield , almost a fifth of commercial property owners in the UK could face penalties for not meeting the new government energy standards.
Landlords and investors are being urged to understand the risks and make the required improvements to achieve higher ratings or see a dramatic decrease in the value of their assets.
The Energy Act was passed in 2011 with an aim to change the economics of sustainability in the UK. The act included a provision that from April 2018 it would be unlawful to rent out a commercial property that fails to meet the Minimum Energy Efficiency Standard (MEED) of an ‘E’ rating.
Now, property owners must make improvements to their buildings and achieve an ‘E’ or higher in their Energy Efficiency Certificate (EPC) rating by 2018 or risk being barred from letting them.
Currently, when a commercial property over the 50sq metre threshold is rented or sold an EPC is required to show how well the property is performing, however, there is no legal obligation for the landlords to improve it.
Cushman & Wakefield found that approximately 20 percent of commercial property in the UK currently falls into the categories ‘F’ or ‘G’, and a further 19 percent are classified as ‘E’ – sitting just above the legal limit.
From 2018, any building that fails to comply will be classed as ‘substandard’ decreasing the value of the building and resulting in a fine of up to £150,000
This is proving to be a worrisome time for commercial property landlords and investors, some of whom may have to make costly changes to their properties before the cut-off date.
Phillip Webb head of project management and consultancy Cushman & Wakefield stated:
‘These regulatory changes will have a significant impact on the landlords’ ability to lease property, with the worst rated buildings unlettable by law.
However, owners should bear in mind that occupiers will increasingly favour higher EPC – rated buildings which will have lower running costs, and help companies prove they have a strong sustainability track record’
Alan Somerville, Head of Strategic Energy and Sustainability at Cushman & Wakefield, added:
'Investors need to act now. Although 2018 may seem some way off, given the time needed to identify where building efficiency upgrades are needed and to ensure the work is completed, delaying this process could prove very costly.
“It is possible for building owners to declare themselves exempt from the regulations in certain circumstances, however, they must sign up on a register which will be open from October 2016.'