Rising tide of emissions rules threatens to drown smaller landlords 

More than £ 60 billion will have to be invested to drag UK offices to new environmental standards, according to Savills’ analysis, which adds to the pressure on homeowners of old buildings who are already facing the transition to hybrid work.

Homeowners are striving to ensure that offices meet new emissions regulations, as well as the expectations of tenants and investors who are committed to making their businesses greener.

By 2025, every commercial building in the UK will require an Energy Performance Certificate (EPC), which ranks its energy efficiency levels A to G. New minimum energy efficiency standards, now before Parliament, will require buildings to have a minimum rating of C by 2027 and B to 2030. Those that will not become illegal to spend in most cases.

Large property owners are able to absorb the cost of this work, but small homeowners in cities with lower average rents will struggle, with the risk that the value of their buildings will spiral downward.

“The challenge is your secondary town where the rent is, at best, £ 20 per square meter. How do you justify spending £ 80 a square foot? [to make a building meet new standards]Said Matt Oakley, head of commercial property research at Savills.

This legislation is an important tool in increasing the UK’s building stock, which directly accounts for about a quarter of the country’s total greenhouse gas emissions, according to the UK Green Building Council.

But with 85 per cent of offices in UK cities now ranked below B, it also poses a significant obstacle for homeowners to vacate.

Paying for better insulation, new facilities or cleaner energy is “especially worthwhile for large homeowners in large regional cities and London because the capital value per square meter is high enough,” Oakley said.

The largest registered homeowners in the UK, such as British Land, Landsec or GPE, have already pledged funding for the greenery of their portfolios and are confident that potential tenants will be willing to invest more to seize a green building.

“These conquerors for whom they exist [and] “A zero net is really important, their real estate footprint is one of the two levers they need to pull. The other is their travel policy,” said Mark Allen, CEO of Landsec, a large office developer and homeowner concentrated in London and Manchester.

But for smaller property owners, with less good capital, who make up a much larger share of the UK office market, it is harder to attract tenants and will now require the largest expenditure to reach new emission standards.

These costs are expected to rise only in the coming months, with the disruption of the supply chain and Russia’s recent invasion of Ukraine will result in a dramatic rise in the price of goods and materials.

Both Alan and Oakley describe the EPC regime as a “blatant” tool. The certificate takes a theoretical reading of energy use at a single point in time, similar to the battery performance assessment that a computer or phone manufacturer may provide to consumers.

Oakley estimates that by 2030 a more nuanced emissions monitoring system will be introduced that captures real-time energy use. The current regulation “will undoubtedly change and should change in markets where homeowners cannot spend the money,” he said.

Rising tide of emissions rules threatens to drown smaller landlords  Source link Rising tide of emissions rules threatens to drown smaller landlords 

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