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Energy Performance Certificates have either been misunderstood or missed altogether, Envos clarify the reasons 
why the new legislation is not merely another red-tape initiative but a valid way of reducing company expenditure

January 4th sees the introduction of new environmental legislation which is expected to usher in a fundamental change to the way commercial property is bought and leased across the UK. From this date it will become a legal requirement for property owners and agents to provide to buyers or tenants an Energy Performance Certificate (EPC) for any commercial property being offered for sale or rental. On the surface this may sound like another layer of bureaucracy that property owners and agents have to satisfy but the reality is that 49 percent of the UK’s total energy usage now goes on heating buildings and the Government is clearly determined to act.

The changes are being driven by the EU Energy Performance of Buildings Directive and the need to reduce energy use and emissions to meet the Government’s objectives to cut carbon output by 80 percent by 2050 under the EU Emissions Trading Scheme. But, against a backdrop of rapidly rising fuel prices, which have seen gas price hikes of around 50 percent and electricity price rises of around 30 percent in the past 12 months, energy performance is also rapidly rising up the agenda for property buyers and tenants. The contraction of the UK economy has added to this, with all occupiers looking to cut costs.

Energy Performance Certificates (EPCs) will give buyers and tenants a report on the energy usage and efficiency of a commercial property and highlight where improvements can be made. Gaining a poor EPC rating could have a significant impact on the value of the property. In due course a poor rating is expected to reduce rents and could also cut the market price of the property itself. So the new requirements will have more far reaching consequences than many currently realise.

This of course, is the intention. By forcing the market and sellers to quantify energy performance and consider it at point of sale and rental, the Government hopes that potential buyers and tenants will compare the environmental performance and running costs of different buildings, and those that perform less well will automatically become less attractive – with an obvious knock-on impact to the value.

However, time is not on the side of commercial property owners when it comes to gaining an EPC or installing energy efficiency measures to meet the January deadline. The EU Energy Performance of Buildings Directive became law on the October 1st but, because of the lack of qualified assessors and a general lack of awareness among building owners, Communities and Local Government (CLG) opted to introduce transitional arrangements for implementing the directive. The move was effectively an admission that there were not enough qualified assessors to undertake the surveys and that more needed to be done to educate building owners about their responsibilities.

This is still the case and there are far from enough assessors to conduct EPCs, particularly given that all commercial property now coming onto the market will require a certificate. Given this scenario, early planning by property owners and agents will pay off, particularly in today’s depressed market where effective marketing and rapid engagement with potential buyers or tenants is more important than ever. But more than that, using the EPC as a planning tool to identify efficiency improvements and invest appropriately in their buildings will also help commercial property owners get ahead of the pack and ensure their property is more attractive to potential buyers and tenants.

The recent CBI and GVA Grimley quarterly Commercial Property Survey found that 57 percent of businesses said, in an ideal world, they would walk away from up to a quarter of their leases, including 90 percent of retailers. While many of these organisations will, in reality, stay put - due to long term leases and potentially expensive break agreements - the survey demonstrates the current commercial property trend. Next year we are likely to see a glut of distressed commercial property sales and rentals driven by the now inevitable recession.

The in-built cost savings that are achievable from having energy efficient premises will make those buildings which have high EPC ratings a much more attractive prospect. And the changes that need to be made to achieve this are often simple and relatively cheap. But the time to commission an EPC and use it to affect these environmental investments to commercial property is now. The biggest hindrance to gaining EPCs remains the lack of awareness. Unless owners and agents address the need for EPCs now, the delay gaining the assessments has the potential to dampen an already quiet property market as owners and agents scrabble to gain energy performance assessments from a small pool of qualified assessors.

EPCs may sound like just another legal hoop that has to be jumped through before a property is marketed but the reality is that they have the potential to become a measure of value, and running costs, that buyers and tenants currently do not have access to.

In a declining market where every opportunity to maximise value and saleability needs to be grasped, we believe early action on EPCs and a co-ordinated approach by agents working with Envos will pay dividends.

How to combat unnecessary emissions:
Ensuring windows are double glazed, heating systems are efficient and buildings are properly insulated and pipes lagged, the average energy use for a property can be cut by at least 20 percent.

For a small commercial building using just £1,000 a month in energy, this equates to a £2,400 a year saving, and for larger properties the saving can easily run into six figures. In the current climate this type of in-built cost saving is clearly attractive.

Changing from T8 fluorescent tubes to T5 tubes can result in a further saving of up to 35 percent in lighting bills. On a 60,000 sq ft building we recently assessed for an asset manager in Milton Keynes this would result in a yearly saving of over £20,000, a very considerable reduction.

Agents have a key role to play in 
initiating EPCs early by:
Identifying EPC assessor partners and presenting a joined-up package to clients.
Organising an EPC simultaneously with the agent’s appointment means that marketing the property happens sooner and is better managed.
Working with the owner and Envos,  an EPC helps to decide which energy efficiency improvements will have the greatest impact on the sale price, rental yield or marketability of the property.

Written by: Wade Barker, Managing 
Director of Envos,
The leading commercial property energy certification and carbon 
management specialists. For more information, Telephone: 0845 094 9240 or visit envos.co.uk