Poor Energy Performance Certificates could make one in six commercial premises unlettable in 2018

WSP, EPC

As much as 17% of the UK’s investment real estate could be unlettable in five years’ time under new EPC regulations (Energy Performance Certificates), according to environment and engineering consultancy WSP. Provisions detailed in the Energy Act make it mandatory for commercial properties with an EPC lower than E to be brought up to standard before they can be let.

WSP’s research of over 4000 EPCs it has undertaken since its inception in 2008 shows that around 17% of commercial property could be affected, rising to 35% if E-rated buildings are included. EPCs are benchmarked by Building Regulations, which are continually updated and revised, so that even ‘safe’ ratings such as E and D may not meet the standards required in 2018.

WSP’s research shows that London is marginally better than the national average, with 14% of commercial property needing to brought up to scratch — rising to 35% if E-rated buildings are included.

WSP says that it is already seeing a market reaction to the Energy Act provisions, with ‘price chips’ being used and deals stalling on low-rated buildings.

Associate director Daniel Grandage says, ‘There is a significant threat to commercial-property owners that they will lose income if they are not aware of, and do not react to, these changes. Although the regulations will not come into force until 2018, they are already having an impact, with buyers now looking to invest in D-rated assets or above. It just shows how important it is to understand the risks that face your portfolio so that you can be prepared and take action.’

WSP’s research shows that upgrading to efficient lighting will have the biggest effect on ratings. Accurate data to avoid default assumptions would also help

Daniel Grandage explains, ‘Many EPCs created during 2008 and 2009 are of lesser quality and use default values where efficiency values couldn’t be source, which can mask the true rating of the buildings.

‘Furthermore, the rules, conventional and quality assurance were less developed that they are today, and many older EPCs do not truly reflect the actual condition of the building. The question to ask is if they were re-run in 2018, would they stand up to the inevitable scrutiny of a potential investor?’

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