Newsletter May 2008

Commercial market caution over Energy Performance Certificates

Recent legislation introduced to ensure existing commercial buildings are energy efficient has been met with caution from one of the country’s leading property consultancies.

Richard Pearse, project management partner at King Sturge, believes Energy Performance Certificates (EPC) could bring problems to the industry because of the potential lack of assessors required to carry out checks on buildings.

“At the moment, there are only around 30 to 40 qualified assessors listed on the central government website”, said Richard. “While EPCs have heralded a positive step forward for the industry, the low numbers of assessors are causing concern and unless this is addressed it could lead to a bottle neck in the issuing of Certificates for landlords wanting to exchange stock. As one of the founder members of the UK Green Building Council, King Sturge has already put in place resources to assist landlords, developers and occupiers to advise and manage the preparation of EPCs.”

Under the new legislation, property bought, sold or let must undergo assessment by an accredited specialist who will report on the construction of a building and the performance of its service installations, such as air-conditioning. Not too dissimilar to the energy ratings displayed on household white goods, EPCs will provide a simple clear banding, from A-G, on a building’s energy efficiency. The bandings are calculated by software which models the energy performance of the building against specific criteria.

“The major issue with this situation is that it will be grossly unfair on landlords if they are delayed in letting or disposing of assets due to a back log of assessment surveys being carried out”, continues Richard. “This is particularly relevant if it over runs into the time allowed before empty rates tax kick in, which will clearly have financial consequences for owners.”

The first phase of the legislation, which came into force on the 6th April, stipulates that owners of commercial buildings over 10,000 m² (107,660 ft²) will be required by law to produce an Energy Performance Certificate. Smaller buildings of 2,500 - 10,000 m² (21,532 - 107,660 ft²), and those let to the public sector, will be subject to the regulation from the 1st July. In a bid to avoid 2007’s HIPs fiasco, however, the government recently announced that buildings already being marketed prior to the April and July deadlines will be exempt until the 1st October this year.

The certificate is the first time that existing stock will require assessment and follows previous legislation implemented to deal with new construction and redevelopment. “It’s clear that the government wants to identify those buildings which are least efficient and whilst there is currently no financial impact, other than running costs associated with the ratings, there is a concern that the situation will change”, warns Richard. “How it changes has yet to be seen, but it wouldn’t be at all surprising if there were tax implications for inefficient buildings.”

“The full impact of EPCs is not known at this stage, but it is certainly at the top of many landlords’ agendas. We are seeing an increasing number of clients wanting to improve EPC ratings during refurbishment projects and, with rising energy costs, occupiers are sure to consider a property’s energy performance when comparing accommodation.”

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