Where next for commercial property EPCs?

In a recent government report on EPC statistics (the Energy Performance of Buildings Certificates Statistical Release), 74% of ratings for commercial buildings were stated to be Grade C or higher, which is encouraging.

What the statistics don’t show, however, is how small a pool of data these commercial EPCs equate to. Less than 10% of the overall EPCs lodged (approximately 30,000 of the 421,000 ratings) last year were for commercial buildings and the rest were for residential. With this context, the picture looks rather different!

Despite decarbonisation being a key government objective, this apparent bias towards residential holdings, allied to the recent decision to backtrack on enforcing a minimum EPC rating of C by 2027 and B by 2030, raises significant questions about the government’s commitment.

Residential properties clearly outnumber commercial ones. However, the average commercial property is far larger than a domestic one and its energy consumption is also therefore larger. There is also the frequency with which commercial premises are comprehensively redeveloped or refurbished compared with the UK’s housing stock to take into account.

One of the main arguments against more rigid guidance would appear to be a blanket assumption that bringing the UK’s commercial property stock up to standard will involve enormous costs for landlords, with no guarantee of meeting any targets set due to the scale of the task. However, the only viable path to net zero involves adopting a forward-thinking approach and promoting sustainable practices as a norm in all business operations, to mirror the lifestyle shifts and residential improvements being driven forward.

Finding a way to navigate a wholesale shift that can be operationally achievable across the various property subsectors will be no mean feat. But the direction of travel is clear – both occupiers and investors are becoming ever more demanding and discerning in their property selection, with ESG and energy efficiency key investment considerations.

The government needs to demonstrate a steadfast commitment to applying sustained pressure and providing clear targets that the property industry can follow. A lack of clarity only fosters uncertainty, which slows the market further, impacting the economic recovery as well as the decarbonisation effort. Landlords need assurances that their efforts to align with regulations will not only withstand scrutiny in the short term, but also ensure they comply in the long run.

Few across the industry would disagree that the government needs to reassess its approach to Minimum Energy Efficiency Standards (“MEES”) ratings for the commercial property sector and adopt a more forward-thinking approach. So, what are the options available and how do they compare?

• EPCs – Some consider EPCs to be a blunt instrument and they are arguably open to manipulation by rogue operators. Overall, though, they are a good indicator of a building’s energy performance.
• BREEAM – The system is required increasingly by local authorities and favoured by agents, but it does not track energy efficiency in use.
• NABERS UK – This international programme is growing in popularity. It evaluates factors such as energy efficiency, water usage and environmental impact and provides a more comprehensive measure of a building’s sustainability in operation. But results take at least one year to measure post completion.

Perhaps the solution is the incorporation of EPCs and NABERS into joined-up statutory goals, which draw on their respective strengths and mitigate each system’s downfalls.

Kicking the commercial real estate can down the road, however, is not the answer. Maintaining momentum, upholding clear targets and deadlines and ensuring a robust and effective framework is in place from the offset need to be key priorities. Only then will we ensure commercial property professionals know how to make their investments stack up for a net-zero future.