Report warns new energy regulations may see landlords punished if they fail to invest in their properties and meet new EPC standards
The report from Construction Analysts Barbour ABI warns that commercial landlords in regions where property prices are low may decide not to invest in the changes needed to meet new EPC energy efficiency requirements.
“With high streets already under pressure and levelling up funding yet to make an impact, there is a considerable risk that we will see a significant decline in some towns and cities, with landlords deciding not to invest and meet these obligations,” said Barbour ABI Chief Economist Tom Hall.
Landlords that fail to meet the new energy regulations will be penalised
The Minimum Energy Efficiency Standards (MEES) became effective in April 2023. This means that offices and other commercial buildings that do not meet an EPC rating of Band E will be deemed ineligible. In future, energy regulations will become even stricter, as all properties will need to achieve an EPC Band C rating by 2027 and a Band B rating by 2030.
Non-commercial buildings have also been affected by the new energy regulations.
According to a recent investigation by the BBC, six out of ten rental homes in the UK do not meet the proposed new standard for EPC ratings, resulting in many tenants receiving excessively high energy bills.
Landlords who fail to comply with the new requirements may be subject to a fine of up to £30,000. With the new requirements, up to two million landlords would need to enhance their property’s EPC rating to contribute towards reducing the UK’s carbon footprint.
According to Barbour’s analysis of Repair, Maintenance, and Improvement (RMI), planning applications for commercial and office spaces are 40-50% lower than they were before the COVID-19 pandemic, despite the new energy regulations.
Most buildings in the UK will be affected by the rules
Around 75% of office buildings in the major UK markets will be affected by the new energy regulations. Currently, 56 million square meters of commercial space fail to meet the current standards. Regions outside of the southeast will be most significantly affected.
There is also concern that a significant amount of commercial building stock will remain unoccupied, creating an eyesore in urban areas.
The Centre for Cities examined data from the Department for Levelling Up, Housing & Communities to identify the towns and cities most impacted by the new energy regulations. Norwich, Northampton, and Leicester have the highest percentage of commercial property below Band E. On average, 14% of buildings in these areas fail to meet the minimum standards.
However, regarding office spaces, Northampton, Huddersfield, Worthing, Leicester, Bradford, and Hull fared worse. Over 20% of building stock in these areas fell below the minimum standards.
Based on their research, Barbour ABI believes that landlords in these regions have not shown any indication of taking sufficient action to address the issue.
“The situation is made worse by other exceptional forces at play, such as online shopping and the shift to working from home due to the pandemic, which is reducing the demand for physical stores and offices in town centres,” said Barbour ABI chief economist Tom Hall.
“The result is that many towns and cities will struggle to maintain the healthy stock of commercial properties needed to remain economically attractive, trapping them in a cycle of decline that has major implications for the future prosperity of these areas,” concluded Hall.
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