Fifth of UK commercial stock needs efficiency improvements

Savills has called on the UK’s commercial property industry to radically improve its energy efficiency status before new legislation takes effect.

Under the Energy Bill currently under preparation, it will be unlawful for a property with an energy rating of ‘E’ or worse to be rented from 2018 onwards. Savills estimates this currently represents almost a fifth of all UK commercial property – equivalent to 700 million sq ft of property.

Savills are advising landlords of commercial property to make long-term efficiency investments in their properties now, rather than leaving efficiency alterations to the last minute or making ‘just do’ changes. This is particularly crucial in the current climate, as tenants seek to take advantage of current low rents for long-term leases.

It is unclear how most landlords will seek to finance efficiency work as rents do not currently reflect properties’ green credentials. Yet change may be coming. “The UK market has not yet seen a clear hike in values when comparing higher ranking green office properties to that of lower grades. However, if we look to US and German markets we are seeing evidence of clear demand shifts towards green office product,” said Marie Hickey of Savills research team.

The Energy Bill is due to be heard later this year. If suggestions are passed though, landlords will have to face the reality of costly refurbishments or possible demolitions.