Upgrading the 130,000 commercial properties that will become obsolete on 1 April will cost £14bn, according to Rapleys.
The property consultancy said around 1bn sq ft of commercial real estate in England and Wales alone will fall below EPC E, rendering it unlettable.
See also: EG INVESTIGATION: Landlords face £16bn EPC time bomb
It said a basic energy upgrade, which would take F and G-rated properties to an E or D rating at best, would cost £150 per sq m, or £13.95bn.
Lee Fraine, head of sustainability and building services at Rapleys, said: “While these policies were put in place to deal with the very real challenge of climate change and are legally binding targets from the 2008 Climate Change Act and the 2015 Minimum Energy Efficiency Standards, the reality is that in a couple of days’ time smaller landlords who cannot afford to upgrade will suffer.”
Fraine points to the example of a family-owned £20m office building. “Work will cost £4m to upgrade to a D rating. The payback period is 6.5 years. Banks won’t lend to them because it’s a huge amount to only go up marginally. Realistically, in a few years it will need further work and that could quite reasonably cost almost the amount of the building’s value today anyway.”
Further policy changes have yet to be confirmed, but the proposal is that commercial property will need to achieve a D rating by 2025, and potentially a C by 2027/28.
“Once we deal with the F and G properties, there are a further 520,000 commercial properties rated E or D. That’s 378m sq m that could cost £56bn to upgrade. And who is going to fund it?”
Exemptions do exist to the legislation, but they are negligible. They include work that can be proven will not have a payback within seven years; temporary buildings with usage of less than two years; a listed or protected building for which energy performance requirements would mean unacceptable alterations; standalone buildings with a total useful floorspace of 50 sq m; a building used as a place of worship or religious activities; an industrial property that doesn’t use much energy; a property that is due for demolition by landlord or seller with the relevant consents in place; tenancy agreements with up to six months and whose tenants have been in occupation for more than 12 months continuously and tenancy agreements granted for a term of 99 years or more.
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