80% of London’s offices need upgrading to meet new energy efficiency regulations
The Minimum Energy Efficiency Standards (MEES) regulations have been in place since 2018 and require buildings with new tenancies to achieve a minimum EPC rating of E before they can be let to new tenants. From April 2023 the same rule will apply to all existing leases. Almost 10% of London’s office stock currently has an EPC rating of F or G, meaning that it will be illegal for this space to continue to be let next year.
The MEES are set to tighten further, requiring a minimum EPC requirement of B by 2030 (and an interim milestone of EPC C by 2027). 80% of London’s office buildings are below this minimum standard and will need to be upgraded by 2030, an equivalent of 15m sq ft per annum.
While the statistics might suggest a lack of readiness in the commercial building sector, Deloitte’s survey found that refurbishment works are indeed on the rise as EPC deadlines loom. Of 36 ‘new starts’ between October 2021 and March 2022, only 5 were new builds and 31 were refurbishments, amid growing awareness of the built environment’s carbon contributions, occupier demand and incoming legislation.
The survey found that occupiers want offices with a fit-out that reflects hybrid working styles and are flexible enough to adapt as future needs evolve. They are likely to reject offices that do not meet increasingly stringent Environmental and Social Governance (ESG) criteria. However, there is limited availability of prime office space with the right and amenities for existing and potential employees, meaning that occupiers will need to pre-let offices significantly in advance of lease events on their existing buildings.
Net zero causing confusion
Two thirds of landlord and developer respondents to the survey highlighted a lack of definition and clarity regarding terminology such as ‘net zero’ and confusion over a seemingly ever-expanding range of ESG-related benchmarks.
There is confusion over how to address embodied and “new” carbon within either standing assets or new construction, and secondly carbon associated with the operation of a building. The government is set to address the latter with the introduction of a new operational energy ratings system for commercial and industrial buildings above 1,000m² this year.
For more information on changes to EPC standards for commercial buildings, read our guide to the MEES regulations.