MEES requirements pushed back by a year: What this means for commercial properties
The government has extended the deadline for commercial landlords to enhance the Energy Performance Certificates (EPC) of their assets. Now set for 2028, this deadline adjustment from the previous 2027 timeline aims to provide additional time for compliance – but landlords still need to be ready for the upcoming change.
Trade association Propertymark sought clarification from the government regarding the relaxation of EPC standards, particularly in light of Prime Minister Rishi Sunak’s announcement last year relaxing upgrade requirements for domestic landlords. While leased commercial buildings must still achieve an EPC rating of B by 2030, the interim goal of reaching a C rating by 2028 has been confirmed after discussions with government officials.
Ensuring that EPC ratings follow the new deadlines is mandatory for compliance with the Minimum Energy Efficiency Standard (MEES). The MEES is designed to help decarbonise the built environment, which has been identified as one of the highest carbon-emitting sectors.
Support hub and pilot grant scheme underway
The Department for Energy Security and Net Zero hopes to build a Business Energy Advice Service to assist firms, including commercial property agents, in decarbonising. The service will go nationwide in England and Wales by 2025.
It is currently using the West Midlands Combined Authority (WMCA) as a pilot. The WMCA has secured a substantial £24 million in funding, ushering in an opportunity for businesses to benefit from a complementary energy audit. Following the audit, businesses can leverage up to £100,000 in matching funds to implement recommended measures. These encompass a wide range of enhancements, from bolstering investments in state-of-the-art machinery and equipment to optimising manufacturing processes.
The business case for complying with MEES
Research released by CBRE UK found up to 11.9 million square foot of office stock returning to London’s market by the end of 2027 has an EPC rating lower than C. If inefficient building stock is not upgraded to comply with the strengthening MEES, the report predicts ‘a sharp fall in capital value’ – and noncompliant buildings will be unlettable.
An efficient building is also far more appealing to future tenants or buyers. According to Deloitte’s 2023 London Office Crane Survey, occupiers are more likely to reject offices that do not comply with Environmental, Social, and Governance (ESG) criteria. They also expect fit-outs that are flexible enough to adapt to upcoming change.
Much of the incentivisation also points to a short payback period. Sam Carson, Head of Sustainability, Valuation, and Advisory Services at CBRE UK said that, “Even though building upgrades may not immediately pay for themselves in terms of operational savings, it’s likely that on average the renewed occupier and investor interest they bring will result in a stronger investment performance that quickly outweighs upgrade costs. This was evidenced in our recent Sustainability Index report.”
According to CBRE’s recently issued Sustainability Index (November 2023), between Q1 2021 and Q2 2023, energy-efficient office assets outperformed inefficient office assets in terms of investment performance, with annualised total returns of -1.4% for energy-efficient offices and -4.6% for inefficient offices.
Is your organisation ready?
To understand your obligations under the Minimum Energy Efficiency Standards, read our quick guide to MEES.
