An analysis of inner London data from the government’s non-domestic EPC register suggests huge volumes of commercial property may be unsettable because of MEES energy efficiency regulation changes.
According to its review of the latest December 2022 figures, which is inclusive of buildings that are currently eligible for exemptions, the BNP Paribas property consultancy estimates that up to eight per cent of inner London commercial stock could be unlawful for new lettings and unlawful to let from April this year.
And up to 27 per cent could, under proposed MEES regulation changes, be unlawful to let from April 2027. Just over 26 per cent is rated C and could be unlawful to let from April 2030.
Only 23 per cent of inner London stock is rated A+, A, or B and is currently fully MEES-compliant according to current legislation.
The news comes as the Department for Business, Energy and Industrial Strategy’s latest report on construction materials costs revealed the price index for all construction work rose 11.2 per cent year-on-year in December, with costs for non-domestic property construction rising by just under 15 per cent in the same period.
Moreover, the construction material seeing the largest price increase over 2022 was building insulation - up an eye-watering 38.6 per cent.
Minimum Energy Efficiency Standards will apply to all privately rented property, making it an offence to continue to let a commercial space with an EPC worse than an E, even in the middle of a lease term.
Stephen Wolfe, head of commercial at BNP Paribas Real Estate, comments: “The inflationary effects of post pandemic shortages, the Ukraine war, and the cost-of-living crisis have driven up energy and material prices, leaving many landlords at a standstill with rating changes on the horizon. Across London, the market and competition for occupiers is hot, putting the value of assets at an even greater threat. This is no time for landlords to sit on their hands, even super prime asset values are coming down, but further discounts will be expected if your space isn’t up to scratch.”
Donna Rourke, head of ESG and sustainability at the consultancy, adds: “Many landlords are still in the dark about MEES changes. For others, there is a trade-off taking place with their occupiers on where the lease obligations lie in undertaking works. It’s crucial at this time to get works done and get it right, and given that there are such disparities between ratings, ensuring you consult with an expert is more important than ever.
“Improvements that we would recommend for those at a very minimum term include establishing responsibility first and foremost, ensuring your exemptions have been registered to secure the necessary time to make upgrades, and looking at modifications such as replacing boilers and windows, upgrading insulation, and adding solar panelling dependant on budget. This can marginally support an upgrade in rating and can protect and support rents and occupancy in the process.”
Want to comment on this story? Our focus is on providing a platform for you to share your insights and views and we welcome contributions.
If any post is considered to victimise, harass, degrade or intimidate an individual or group of individuals, then the post may be deleted and the individual immediately banned from posting in future.
Please help us by reporting comments you consider to be unduly offensive so we can review and take action if necessary. Thank you.
.png)
Join the conversation
Jump to latest comment and add your reply
This is how the wef I mean government will take your property off you I mean solve the housing crisis
Epc
Everything you , your parents and your grandparents worked for all their lives kaput on one sheet of paper …
This my friends is a so called democracy
So true, it’s EPC that sends a 🥶 shiver down my spine, not s24, not s21…. EPC C, yes the other 2 are bad but the EPC nonsense will stop the places being occupied.
EPC = End Private Capitalism
There are about 2.9m Resi rented properties below a C last time I checked. 34 months to get them compliant, thats 85,000 a month, or 2843 a day, 7 days a week. I wonder whether goverment will perhaps push the date back, no one is stupid enough to drive us over that cliff are they?
Simon, you now have a choice do you prefer the property unoccupied / vacant because of MEES, or occupier by nonpaying doss or drug because of the removal of Section 21.
Now that is Hobson’s choice 🤔
Who would be responsible for bringing this up to standard? The occupying tenant on a full internal/external repairing maintaining lease or the owner
I don't know a single, well-informed domestic landlord who has not already improved their stock up to EPC Grade C. Its so blindingly obvious. Why would we want our customers living in fuel poverty, spending money on gas and electricity (that goes straight off to Norway and Qatar) when that money would be better spent on some rent increases - or just paying the current rent!
EPCs came in in 2008, the MEES Regs came in the 2015, the Government has done the right thing and given all landlords, both domestic and commercial, bags of notice - 8 years to be precise.
The only landlords I've seen that push back on making their assets better and fit-for-the-future, are the tiny minority on this website! I sometimes doubt that these contributors are actually landlords at all. They don't seem to be rational, well informed or invest for the long-term. I think they may be in the wrong business.
The Sunday Times article is interesting because, from what I've read in the professional property press this week, their whole so-called analysis has back-fired and actually proved the positive case for EPCs, not the reverse. Their evidence shows that folk living in the worst houses and flats in the UK use less energy than the EPC model would suggest. WOW, really??!! Well, the EPC model assumes that the tenant heats the whole property to 20 degree all winter long. Only Jeff Bezos could afford to heat an EPC Grade F or G house all winter long. That's precisely the point. The tenants living in EPC Grade E, F and G homes ONLY HEAT ONE ROOM, and they don't do that very often. CarbonLaces have PROVED how accurate EPCs are and their 'research' proves that 8 million families are today living in terrible fuel-poverty. Which means they don't have the CASH TO PAY THE RENT.
I, and every professional landlord I do business with, will continue to improve our investment assets through careful energy efficiency upgrades. Normally best done when the unit is in between tenancies.
One of my properties is an Ex local Authority flat in London in a 1960s block. I phoned the Housing Association who manage the estate about this EPC C business. They told me they had no plans at all to address the issue until they get a directive from the Government. They hinted that these types of dwellings 'might' be exempt on the day the EPC C legislation arrives. So i wait to find out how and when i should react. But there are a vast number of these types of dwellings, this is a problem that isn't going to be solved quickly. I imagine the list of exempted properties is going to be HUUGE.
Please login to comment