New changes will come into force this spring, the start of a series of new legislation that will require landlords and developers of commercial buildings to review their portfolios, making improvements to upgrade each building’s Energy Performance Certificate (EPC).
Modern occupiers are looking for much more from their workspaces in 2023. Requirements are no longer confined to the aesthetics, the flexibility, or the location – they must also now meet each occupiers’ sustainability principles.
Agents and developers are seeing enquiries from customers who want a space with green credentials; buildings with eco-friendly features and technologies that help them operate more sustainably.
Can you give us some examples where this has been done?
There are some fantastic examples of pioneering landlords and developers who have adapted their portfolio to meet increasingly sophisticated occupier demands – take for example Royal London Asset Management’s improvements to One New York Street in Manchester – a building that Canning O’Neill is agent for. The building is now BREEAM excellent rated thanks to recent refurbishment.
But there are examples at the other end of the scale too, with landlords holding onto dilapidated structures.
That landscape will soon change however, with a new set of rules being rolled out from the spring to help bring all workspaces in line with sustainability criteria and expectations.
So, what are the rules?
Following consultation in 2019, the UK government set out new regulatory targets for non-domestic buildings which would require landlords to make improvements to make their structures more sustainable.
As with our homes, each commercial building has an EPC, and under this new legislation the government has set a new minimum acceptance level for landlords, meaning that all buildings should have a minimum Level C EPC by 2027 increasing to a minimum Level B EPC by 2030.
The result should see around one million non-domestic buildings improved by the end of this decade.
Why must landlords act now?
While those dates sound safely in the future, the government has unveiled a roadmap that will usher changes along throughout this decade. It’s imperative that landlords and developers do take action as they may be prohibited from renting out their space if the new targets aren’t met.
The first changes must be made imminently – by March 2023, after which time any properties with an EPC below E rating – and with no valid exemption – may be subject to enforcement.
After March, the threat of enforcement will remain, with a final deadline of 1st April 2025 – after which time all rented properties will need to be registered and have a valid and improved EPC.
The big deadline comes in 2027 at which point all rented properties will need to meet a minimum of EPC C, then by 2030 that must be increased to EPC B.
What does this mean for occupiers?
There is of course a role for occupiers to play too here, and that’s why it’s important to have conversations with your commercial customers now, especially if they are permitted to make improvements to a space as part of their lease. As landlord you’ll need to ensure that those are carried out in line with future legislation.
Similarly, if you are a tenant reading this, you’ll want the assurance that your landlord is going to meet targets and is creating an energy efficient space for you to operate in. An open dialogue is the best way to achieve this, while advisors like Canning O’Neill can help explain what’s on the horizon as the new changes come in.
What if I am exempt?
There are of course a few exceptions to the rule, and while we would urge landlords to make improvement to meet these changes, exemptions can be granted.
The main areas are for things such as tenant access – for example if you are a landlord and a tenant is restricting you from entering a building, meaning you can’t carry out any improvement or construction works to make energy efficiency improvements.
Other exemptions can be secured if for example a landlord can make the case for improvements devaluing a property or its ability to be rented.
This new legislation is nothing to fear, and the roadmap is helpfully planned out over the next decade so that landlords and their tenants have time to do things right. Now is not the time though to bury our heads and it is imperative that anyone not meeting EPC targets looks for support sooner rather than later.
The outcome will be millions of greener, more sustainable workspaces – something we know that every modern occupier craves.
More in-depth information about the incoming legislation can be viewed here.