According to Property advisors Savills, an estimated 700 million sq ft of commercial property floor space may be required to have an energy efficiency overhaul by 2018, 4.6 million sq ft of which is located in Cardiff.
The company’s latest report ‘Opportunities in Green’ explores the impact of Private Rented Sector regulations which form part of the 2011 revised Energy Bill.
The firm suggests the revision of a requirement to upgrade private rented properties to an Energy Performance Certificate rating (EPC) of grade E or above will be most significant in London.
The firm states that due to a large number of lease renewals predicted to come to the market in the next five years, landlords left with vacant commercial properties would be advised to take the opportunity to improve the energy performance of their property.
According to the Department of Energy & Climate Change (DECC) 62 per cent of non-domestic properties are rented and of this figure 18 per cent have a rating below grade E.
The Director of Savills building consultancy, Michael Pillow, comments: “If the legislation goes through, leasing of a sub grade E standard property will become unlawful from April 2018. Although upfront payment issues to enable energy consumers to improve their property are considered within the Government’s proposals under The Green Deal financing framework, in practice there are many issues still to be resolved such as recovering charges incurred during void periods or in multi- tenanted properties which could raise concerns and needs close examination.”
Never the less, Savills does state that going beyond basic levels of refurbishment can reduce the level of vacant periods in a commercial property as firms are increasingly showing a preference for greener commercial properties to rent.
Savills proposes that any landlords who improve the energy efficiency of their premises can boost the long term value of their commercial property portfolio.
Marie Hickey of Savills Research team said: “It’s the avoidance of the ‘brown’ discount rather than the hunt for the ‘green’ premium that will drive investors/landlords to improve the efficiency of their portfolio. The UK market has not yet seen a clear hike in values when comparing higher ranking green office properties to that of lower grades. However, if we look to the US and German markets we are seeing evidence of clear demand shifts towards green office product with a recent report suggesting demand has tripled in the five core German markets.”
According to Savills most recent green office bulletin covering the German market, both leasing and investment market demand for ‘green’ office space has risen considerably over recent years. The yearly take-up of ‘green’ office space in the top five German markets (Berlin, Dusseldorf, Hamburg and Munich) has increased three times as much in size on average from approximately 50,000 sq m between 2005 and 2008 to 150,000 sq m in 2009/2010.
The property advisor suggests that the trend highlights the fact of sustainable offices are no longer a niche product but will become market standard.
Gary Craver, commercial head of Savills Cardiff, comments: “With the ever increasing costs of energy, early action to introduce green and energy saving enhancements is likely to give properties some advantage over more obsolete stock, making them more attractive to occupiers and possibly enhancing rent and value. Review, analysis and delivery well before 2018 will be key.”
