Why energy performance (EPC) ratings for commercial buildings are important to landlords

Why energy performance (EPC) ratings for commercial buildings are important to landlords

Commercial property is at a crossroads; whilst its new build rate is low at 2%, the stock currently accounts for 10% of the UK’s total greenhouse gas emissions. The only viable way to minimise these emissions and bring them in line with the UK’s commitment at the Paris Climate Summit is for a large-scale retrofit of commercial property. This is no small task, as this sector is complex in terms of its diverse building types and its involvement with a range of stakeholders.

The UK government are committed to reducing emissions. In Section 49 of the Energy Act 2011, commercial property landlords will be prohibited from letting any property that doesn’t meet the Minimum Energy Performance Standards (MEPS) by the 1st April 2018. Landlords will only be permitted to let their properties if their Energy Performance Certificate (EPC) rating is at least Band E.

This bill was introduced to speed up energy efficiency upgrades in the commercial sector. In late 2014, 18% of UK commercial property still had an EPC rating of F or G, and with less than two years to go until the regulation deadline, landlords must act now to ensure that they are compliant. For those who fail to meet these impending new regulations, they face a fine of between £5,000 and £150,000, depending on the length of non-compliance and rateable value of the property.

There are additional benefits to retrofitting besides the need to meet impending regulations. Adopting energy-efficient systems and technologies has additional benefits for the occupier and potentially for the landlord in the desirability of renting their building. Typically, 20% of a business’s annual energy costs are wasted through the use of inefficient systems and technology. Therefore, by ‘future-proofing’ commercial property by implementing energy-efficient technologies, the occupiers will save money, whilst also ensuring that the property provides an attractive investment opportunity should it be sold.

There are several initiatives which encourage energy efficiency in commercial property. The Carbon Trust launched a new fund in April 2016, with its goal to provide vital capital for smaller businesses to replace old, inefficient systems across England, Scotland and Wales. The £7m fund was made available to Small and Medium-sized Enterprises (SME’s) on a first-come-first-served basis, offering energy saving training, cost saving assessments and capital support for the installation of energy efficient equipment. Eligible companies can apply for a capital contribution to cover up to 15% of an energy efficiency project. This will enable businesses to invest £55m overall in energy saving projects, primarily by replacing heating and ventilation systems.

Heating offers the greatest scope for efficiency improvements. It is the largest energy expense in a building – and therefore crucial that its operational efficiency is high. However, many commercial landlords are apprehensive about investing in new technologies and systems as they have minimal knowledge on its potential to reduce running costs. Landlords may also fear the disruption that partaking in retrofitting may cause.

There are various energy-saving systems and technologies available. Occupiers can choose to invest in low mass, low water content radiators, which contain a tenth of the water compared to standard steel panel radiators, producing savings of up to 16% on heating bills. These radiators are incredibly lightweight, meaning they are easy-to-install and come with a 30 year guarantee. With less water being used, the radiators offer a rapid response, consequently consuming less energy and reducing emissions.

Heating large spaces doesn’t have to mean over-sized radiators

Dynamic Boost Effect (DBE) technology has also been developed in recent years, heating a room up to nine times faster and producing up to three times more heat, meaning radiators can be compact and aesthetically pleasing. A Low-H2O radiator which utilises DBE technology is the ideal partner for a heat pump, where traditionally the only options have been underfloor heating or over-sized radiators. Using any renewable technology as the main heating source will also make the building eligible for the Renewable Heat Incentive (RHI), where the UK government will more than pay back the cost of the heat source over the course of 20 years.

For commercial property landlords, the MEPS has opened the door for conversations regarding energy efficiency, and how it can best be achieved. Investing in new systems and technology can help the UK government meet its emission reduction targets, but also ensure that the landlord’s operational costs remain low and its investment maximised.