£7.3 billion in commercial property value at risk across region

A staggering £7.3 billion worth of commercial properties in East England are at risk of becoming unlettable, because of new energy legislation effective since 1st April 2023.

The legislation requires an Energy Performance Certificate (EPC) rating of at least E for continued letting, failure to comply not only jeopardises rental income but also exposes owners to fines and reputational damage.

Research by Siemens Financial Services (SFS) estimates a staggering total of £93 billion of commercial property value at risk across England, Scotland and Wales in the industrial, office and retail sectors, if building conversion is deferred.

Entitled Urgent Upgrade, the report highlights the serious financial impact of recent legislation which demands that commercial buildings have an EPC (Energy Performance Certificate) rating of at least E to continue to be let. This equates to £93 billion worth of commercial properties in Great Britain including across industry (£25 bn), offices (£28 bn), and retail (£31 bn).

This is only the first in a staggered approach by the UK government to achieve its net zero goals, with plans to raise the threshold to a C rating by 2027 and to a B by 2030 adding further future pressure to buildings owners and facilities management.

As the research makes clear, without immediate investment owners of F- & G-rated buildings will be left without income and face the possibility of significant fines as well as reputational damage. This means energy efficiency improvements are now a top priority.

To meet this demand and make building conversion affordable, specialist financiers are now offering financing packages which use future energy savings to finance building technology upgrades – covering condensing boilers, solar panels, heating ventilation and air-conditioning (HVAC), insulation, smart buildings controls, and any other technology required to upgrade a building to much higher energy-efficiency levels.

These financing schemes allow buildings managers to achieve a strategic upgrade at low- or even zero-net-cost.

Carolyn Newsham, Digital Industries Financing Partner, SFS, says, “The manufacturing industry is the UK’s biggest emitter of CO2 (second only to the energy industry itself) making its infrastructure ripe for improvements and energy cost savings. The good news is that building projects can go hand in hand with other digitalisation initiatives so that energy efficiency can be achieved throughout the factory, and not just on the floor.”

Toby Horne, Siemens Infrastructure Financing Partner, SFS, “Working with integrated technology-and-finance providers can make building conversion projects zero-net-cost. Given the current urgency to convert, coupled with government plans to increase the EPC threshold in the years to come, buildings management should act now to ensure compliance and capitalise on the potential for both energy and financial savings.”

Ollie Finkill, Business Development Manager – Clean Technology at SFS, added “For businesses to invest in building conversion projects it has to make financial sense. In the context of unlettable properties and undermined commercial value, the business case is a clear and urgent one but future savings (that can be used against the cost of investment) should also be a crucial motivator.”

More details here.

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