The warnings have been there for some time but there are now just four short years to deal with the £29bn green refurbishment bill facing the commercial property industry.
The potential cost – both alarming and imminent – is what it will take to refurbish more than 200,000 commercial properties in England and Wales to avoid them becoming illegal to let within four years.
None of this should surprise, of course. The fact that something would have to be done to raise the sustainability bar has been clear for at least three years. The 2011 Energy Act indicated that it could be illegal to let a property with an Energy Performance Certificate lower than an E by April 2018. Now, with an estimated 16% of England’s and Wales’ 1.3m non-domestic stock rated F and G, EPC specialist CO2 Estates puts the cost at just shy of £30bn.
What’s not clear is how much work has already been done. Many landlords have raised their game. The Better Buildings Partnership – a collaboration of the UK’s biggest commercial property owners – has been improving the sustainability of commercial building stock since 2007. But how much progress has been made by others – especially those holding less stock – is less clear.
There’s still time to act. The market has begun to do its job. With the legislative change just 48 months away, prospective purchasers are already using sub-standard EPCs to chip prices. But the market can’t do it all. The government must explain exactly how it will enforce the Act. As importantly, every property owner needs to ensure every one of its buildings is up to standard.
¦ As the Scottish independence referendum accelerates into view, headlines highlighting potential policy differences between north and south of the border will proliferate. It’s started with pensions. Buildings could be next.
Gordon Brown (remember him?) highlighted Scotland’s age “time bomb” as a reason to back the Better Together campaign this week, arguing that the UK Treasury would underwrite Scotland’s sizeable pensions bill. Make of that what you will. But his intervention served to highlight that the debate is moving from emotion to policy and, broadly speaking, cold hard cash.
This brings us back to EPCs. Less trumpeted than Brown’s intervention this week was the decision by the Scottish government to mandate physical energy performance improvements to existing non-domestic buildings in Scotland. The policy is not dissimilar to the provisions that will bite south of the border in all but one crucial respect. In England and Wales the provisions kick in in April 2018. In Scotland similar measures will bite in autumn 2015.
If there’s a consolation for commercial landlords in Scotland, it’s that the Scottish government ?hoped to effect the change this year. It’s just ?possible that politicians north of the border ?might have other priorities this autumn.
Notwithstanding that reprieve of sorts, it still leaves Scotland in a “worse” position. Regulations and supporting guidance will not be published until early 2015 and brought into force in autumn 2015. That gives property owners a lead time of barely seven months to prepare for the changes.
In truth, this isn’t an independence-driven disparity. But it does serve to remind that if such policy differences for property already exist in a united kingdom, how different might they be in a disunited one?
¦ You may remember Lloyds Pharmacy’s advert for an erectile dysfunction treatment last year showing the Gherkin, ahem, leaning to the left. This week 30 St Mary Axe suffered a further indignity when receivers were appointed to the iconic tower. Despite improving market conditions and recent successes, including a major re-gear with tenant Kirkland Ellis, receivership has been long mooted thanks to a complex financing structure. To misquote the Lloyds advert, hopefully Deloitte’s Phil Bowers and Neville Kahn will return the perk-in to the Gherkin.
damian.wild@estatesgazette.com
