The prospect of more office buildings becoming obsolete as Energy Performance Certificate (EPC) rules change in the next few years is understandably making landlords nervous, but flexible workspace could provide a solution.

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Natasha Guerra

Office buildings with an EPC ‘E’ rating or above can be leased out, but to meet the UK’s net zero targets, regulations are expected to change to a minimum of EPC ‘C’ in April 2027 and EPC ‘B’ by April 2030. The pressure is growing on building owners to future-proof their assets.

A challenge for landlords is the cost of upgrade work to improve energy efficiency, particularly if a tenant has not been lined up to take the space and start generating a return.

Flexible workspace and EPC may not seem like obvious bedfellows, but the two can go hand in hand and solve more than one problem.

With strong demand for flex space, a deal with an operator helps de-risk the capital expenditure on building upgrades. Working with a good operator takes some of that pressure away, because they understand the market and how to fill up office space.

But more than that, a flex operator will help improve energy efficiency with their fit-out. They have their own environmental, social and governance targets to meet and running costs to cover, so it is in their interests to provide a fit-out that has higher energy efficiency.

Installing energy-efficient lighting and lighting controls are just a starting point; work could include heat-recovery ventilation, water harvesting, electric water heating and even solar panels.

Working collaboratively at an earlier stage of the refurbishment could also make the fit-out more cost-efficient.

A landlord’s fit-out that doesn’t suit a tenant will get ripped out, which wastes money, isn’t sustainable and does not consider circular economy principles. Flexible workspace customers are renting desks as part of a package. The office’s look, feel and set-up are part of what they are buying into.

It is more environmentally friendly to do a Cat A and B fit-out together. In fact, improving energy inefficiency is increasingly part of the conversation.

Savvy landlords are seeking deals with flexible operators that include an upgrade in the EPC. It can be part of a future-proofing plan for both parties.

Landlords do need to be mindful that not all operators have the same level of expertise in fit-out or with fit-out contractors. As with any contract, due diligence is important. Landlords should ask whether the operator has appropriate experience procuring and managing fit-outs that are good quality, good value and meet desired sustainability requirements.

Depending on what upgrade work is planned, some operators may also be able to do fit-out work while tenants remain in occupation to minimise the loss of revenue. Lighting or changing the boiler can be done while the building is occupied, for example.

Given the rising demand for flexible workspace and the growing need for more sustainable offices, flex, when approached correctly, could be a win-win.

For the landlord, it means they get an environmentally sustainable product targeted at a market where there is sustainable demand.

Natasha Guerra is chief executive of Runway East