What do new energy standards mean for commercial landlords?

The clock is ticking, and for those in commercial property a crucial deadline is now less than a year away, with changes to minimum energy efficiency standards (MEES) in England and Wales coming into effect on 1 April 2023. It is a countdown that will climax in a prohibition of letting properties with an EPC rating of either ‘F’ or ‘G’.

There are exemptions, but seeking them is only likely to delay the inevitable. As the UK strives for sustainability, MEES regulations will ramp up with proposals suggesting a minimum EPC rating of ‘C’ will be required by 2027 and ‘B’ by 2030.

Eking out an ‘E’ is, therefore, a short-term strategy and it would be prudent to approach improvements with an eye on the likely expectations of the law – and of tenants – in a decade’s time. The expense of aiming high in the energy-efficiency stakes might be unwelcome but it is necessary in a competitive market.

Thanks to modern design methods, contemporary stock can be A* standard, which is a big tick for those occupants mindful of environmental governance. Older buildings can be trickier, but even those constructed more than a century ago can secure a ‘B’ while preserving their historic features.

In brief, the better the grade, the more marketable a property. Of course, to talk about MEES purely in the context of occupancy is missing the point. The drive for improvements is based on a real need. A lot of energy is expended in commercial buildings, so reducing consumption by even a few percentage points would have a big impact. The more efficiently we can heat, cool and light properties, the brighter the future will be.

However, given that reversing climate change was not a prerequisite when most portfolios were created, it is understandable that landlords may be unsure how best to meet MEES milestones. For those puzzled by the conservation question, it would be sensible to seek professional support.

Barry Shambrook is a partner at HartDixon