52
roundtable: commercial property ... continued from previous page
Pavey noted that EPC assessment relies heavily on the fabric of a building, and planners, through the building regulations, are now focusing on the fabrics of new buildings and refurbishment projects. “I think this legislation is linked to EPCs not DECs because the landlord has responsibility for the fabric of the building, not the tenant. That’s the mindset of where they are going.
“Maybe they have got it right to go towards EPCs, but either way it is a big task to change a building fabric-wise – and expensive.”
difficulty further exacerbates the issue of who pays for the work. It is very possible that disputes here will end up in Court.”
Investments were also being affected, with fund managers now very aware of the capital costs of refurbishing buildings. “Changing a building from an EPC of G to D is expensive; to get it up to a C or B will be a very large capital number.”
Will EPC ratings add to
property obsolescence? Coote raised the concern of obsolescence. “The Thames Valley has about two million sq ft of Grade C properties and more than half of them are locationally or physically obsolete, with very low EPC ratings. These need to be converted – perhaps becoming hotels or residential – otherwise they will just sit empty in a Grade C bucket.”
Harris noted that the same could be said for the rest of the country.
Richard Griffiths We’ll see you in court
With leases and service charge provisions commonly including landlord-supporting catch-all clauses such as ‘complying with statute’ and ‘doing works in the interest of good estate management.’ Coote predicted the new legislation would provoke legal test-case activity, especially in multi-let scenarios. “In some contexts there will be legal challenges, such as when a landlord upgrades the EPC, and puts the building costs through the tenancy service charge.”
Such aspects were now being far more closely considered by tenants’ advisers, he noted.
Finnis claimed the legislation could have a radical market impact simply through the ‘law of unintended consequences’. “The idea behind the legislation makes sense but the question is ‘Where do you draw the line?’” Hence, five years away from the legislation coming into operation, buildings slipping down the EPC ratings were already becoming less popular, simply because of their inability to be let in due course.
Also, with leases spanning the 2018 deadline, landlords are increasingly being asked to specify their future plans to upgrade low EPC-rated buildings.
Another concern was the effect of upgrading works on business occupational continuity. “To replace an air-conditioning system in a multi-let building is very challenging and capital intensive. Refurbishing a building with a tenant in occupation is not impossible, but it is difficult and expensive. And this
www.businessmag.co.uk
Dean pointed out that SEGRO was constantly upgrading commercial premises on its Slough trading estate to meet client requirements and EPC ratings. She suggested 8%
of the Slough stock might require EPC upgrading, but SEGRO was already tackling the challenge as an ongoing process.
Coote suggested that poor floorplates and floor-to-ceiling heights make buildings obsolete rather than poor EPC ratings. “Modern workplace occupiers don’t need so much space, about 40% less, but they do want it of a higher quality and that exacerbates the obsolescence problem.”
Finnis doubted the effective implementation of the legislation deadline. “I think it will be very challenging to maintain the current deadline. The stock replacement rate in the Western Corridor market is at an all time low and a proportion of the stock is obsolete in the context of this legislation. A hard deadline will create a fundamental issue and potential lack of supply by saying that space worse than an E rating cannot be let/ sub-let.”
‘Hermetically sealed boxes’ put Thames Valley
at risk Finnis pointed out that 20% of all UK stock is EPC rated at F or G – and the Thames Valley might be at a potentially greater EPC risk than other regions. “Our research shows that more than 90% of western corridor stock is more than ten years old. A lot were produced in the 1990s as hermetically sealed glass boxes with old- fashioned air-conditioning systems that use a lot of electricity.
“As these buildings come to the market to be let or sub-let, I fear EPC issues will arise because these buildings are expensive to run in energy terms..”
Harris remarked: “If 20% of UK stock is F and G rated, is the Government saying one fifth of buildings will have to be bulldozed? That’s impossible.”
People in glasshouses . . .
“I don’t think the Government will want to go that route,” Coote confidently predicted. According to his research, several offices currently occupied by government departments in Reading were EPC rated at E or below – including the Environment Agency housed in a G-rated building.
Kate Dean
“So this legislation could be successfully blighting the Government’s own stock?” queried Murray.
Coote: “I’m not aware of any government initiative to address the EPC issues of their own occupied properties.”
Griffiths stated the legislation would definitely include an economic feasibility test, so if a building cannot economically be brought up to the correct EPC level, it will not necessarily be termed unlettable.”
“But what will that economic level be?” asked the Roundtable.
Griffiths said he believed it would based on the interest costs of taking out government- backed Green Deal funding to re-engineer the building, compared against the overall energy saving costs likely to be achieved.
Murray: “Perhaps they should be leading by example.”
Possibly, someone at the Roundtable mentioned glasshouses . . . .
Refurbish, re-engineer or
demolish? Dean revealed that SEGRO had spent £5.5m at IQ Winnersh to take one building from EPC rating F to B. “But now we have a Grade A building rated BREEAM excellent, with a 25-30 year lifespan, a generous parking ratio and an
THE BUSINESS MAGAZINE – THAMES VALLEY – JUNE 2013
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60