Buildings with the highest energy performance certificate ratings have a 72% lower gas cost per square foot than those with the lowest efficiency, new research shows.
BDO’s PropCost Offices 2022 benchmarking report, developed in association with RICS, covers the impact of investment in sustainable office spaces on service charge costs charged to occupiers, and supports the position that cost savings can be achieved by investing in sustainable technology.
The analysis of expenditure data from 2019 through to the beginning of 2022 found that service charge costs are running at 20% less for a building with an A-grade efficiency certificate, compared with the least efficient buildings in the data sample.
The EPC efficiency rating of a building has become increasingly important to investors in recent years, with the introduction of Minimum Energy Efficiency Standards. It is expected that by 2030, commercial buildings will need to be rated A or B in order to grant a new lease. However, within the PropCost dataset, only 23% of offices would meet this standard. This suggests that changes in MEES would provide a significant challenge to the sector to meet the higher requirements.
Andrea Hunt, partner and service charge accounting lead at BDO, said: “As agile and hybrid working arrangements become the new normal, employers and the property sector need to think quickly and creatively about how to attract their people back to the office with greater staff benefits, and negotiate property service costs and workspace design to reflect usage and ESG factors.
“We have sought to deliver a truly independent benchmark for service charge costs. In the context of a rapidly changing social, economic, and environmental landscape, as well as ongoing government reviews of property legislation. The challenges ahead for the property sector will be immense, and insights into the future of service charges will be vital.”
Paul Bagust, head of property standards at RICS, said the initiative was “a response to the call from industry for better benchmarking and data over many years”.
Highlights of BDO’s 2022 report of service charges on UK office spaces:
- Total UK service charge reviewed value was £270m
- 22% of service charges included retail space
- 34% of total service charge costs were spent on soft services
- 23% of offices had an EPC ratings of A or B
- 72% reduction in gas costs for the most efficient buildings (EPC rated A) compared with those EPC rated E to G
- 51% increase in service charge costs for a small office compared with the largest assets
- 68% increase in service charge costs for central London* compared with the ‘rest of the UK’*
*As defined on page 33 of the report - 13% of buildings had a BREEAM sustainability rating
- 2.7% decrease in total service charge costs in 2022 compared with 2020
- 75% of service charges in 2021 had lower spend than budgeted.
The full report is available here.
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