Navigating the energy roadmap
In five years’ time it will be illegal to let any commercial building with an Energy Performance Certificate of F or lower. Anthony Coumidis of McBains Cooper, considers the challenge the owners of these existing buildings face to avoid assets being rendered obsolete.
Under the Energy Act 2011, by 1 April 2018 it will be illegal to let any commercial building with an Energy Performance Certificate (EPC) of F or lower. The Energy Act is a wide-ranging piece of legislation. A key element, with real impact on commercial property managers, owners and investors, is the restriction on letting both residential and commercial properties that fall below stipulated energy criteria.
Set at 2018 for now, a planned approach to compliance, given the cost and time taken for upgrades to take place, is key to meeting the deadline and protecting the bankability of commercial premises.
The level of energy efficiency required, illustrated by the building’s Energy Performance Certificate, looks set to be stipulated by the DECC. An announcement from the Energy & Climate Change Secretary last year stated: ‘…the Government will make it unlawful to rent out a house or business premise which has less than an E energy efficiency rating, ensuring at least 682 000 properties will have to be improved.’
The commercial property sector accounts for 17% of the UK’s total energy use. The reality is that much of the UK’s two million commercial building stock is old, sometimes even historic in nature, with clear obstacles for property owners, investors, managers and FMs when it comes to maintaining their operability — much aside from going the extra mile to meet higher efficiency demands. Data indicates that currently some 15 to 20% of commercial buildings fall into the F and G categories, including many listed or historical properties. A case in point is the City of London, where on-going maintenance is focused on daily operations instead of investment in wholesale refurbishment with upgrading measures that provide future proofing.
In ‘Improving the energy efficiency of our buildings: a guide to Energy Performance Certificates for the construction, sale and let of non-dwellings’, published in December 2012, the DCLG provides guidance on the ‘Energy Performance of Buildings Regulations 2012’ and the Directive. It is this regulation that hails the introduction of EPCs, DECs (Display Energy Certificates) and air-conditioning inspection reports for all non-residential buildings, regardless of whether they are for public access or not.
Under the regulation and effective from 9 January 2013, listed buildings no longer require an EPC, providing the owner of the building can prove they do not need the certificate. New leases to the existing or new tenants will not be a trigger for an EPC. Instead, the requirement is simply that an EPC of less than 10 years must be in place. The full EPC will no longer have to be shown on letting agents’ details, with just the minimum requirement to be shown. However the guidance notes suggest best practice would be for the EPC table to be shown in full. Despite these changes, owners and managers of commercial buildings must first ensure an EPC is in place before a property can be marketed.
Without action now, property owners and managers face their buildings becoming obsolete and having to stand empty. Compliance aside, there are further benefits to improvements — such as reduced running costs and environmental impacts, improved functionality and higher user satisfaction.
By working with an interdisciplinary consultant it is possible to build a unique energy model for individual buildings, reflecting as closely as possible the real energy usage of the building. Because each building comes with its own set of variables — where it is sited in the country, its aspect, how old it is, how tall it is, what the method of construction was, how it is used and by whom — such a model can be used to analyse the cost benefit of refurbishment work. This way the owner is able to make an informed decision about the options proposed by the contractor.
While an engineering consultant can consider specifics, an integrated approach from multiple points of view has a much broader benefit for the property owner or manager. For example, by working together an architectural, M&E and QS team can draw from the building data and propose either a blend of upgrades to lighting, glazing, fabric, controls and HVAC or alternative routes that might result in a higher yield for the owner and any investors. For example, altering the use of the building, so that an office is transformed into residential apartments, could have a more profitable outcome.
Cost is seen as a key obstacle, with many in the property profession questioning who should shoulder the burden of these changes. It is likely that landlords will seek to rely on their tenants’ ‘statutory obligations’, getting them to cover the cost of works. Energy-service companies offer one route to financing energy-improvement measures. Property owners can offset the cost of improvements to the thermal performance of building fabric, HVAC and zero-carbon technologies, against the savings these measures deliver. For some commercial properties it is hoped the Green Deal will provide an alternative financing route, though this currently only covers the domestic sector. Where a newly installed heating technology falls under the categories of the RHI, a cashback incentive provides a cost effective means of improving heat generation efficiencies with substantial savings.
A low energy rating combined with the cost of retrofit works means property owners face the potential of reduced value in their asset. Owners need to consider leases of whole buildings, to ensure these are drawn up to give the best chance of recovering the cost of any works from the tenants. Where tenants themselves are carrying out work on the building, the owner needs to be aware of the impact this may have on the energy rating and, where possible, work with them to ensure beneficial materials are used.
Owners and managers of commercial premises can achieve a seamless approach, with EPCs prepared in line with the recent changes and a broader holistic view of the options. They will also have access to professional advice that is underpinned by a raft of cross-sector experience, management and implementation of the measures themselves and financial routes to achieving these — as well as insights into the legislation as it evolves.
Anthony Coumidis is director of engineering and sustainability at interdisciplinary property and construction consultancy, McBains Cooper.