Nearly two-fifths (39%) of commercial landlords are unaware of new standards on Energy Performance Certificates (EPCs) coming into force in April 2023, new research* from property business experts Handelsbanken shows, underlining the confusion in the market and need for longer-term planning.
The study found just one in 10 (9%) commercial landlords has an EPC rating of E or above for all of their properties – new legislation from April next year means all commercial rented properties in England and Wales will need an EPC rating of at least E in order to continue being let. Currently, an EPC rating of at least E is a legal requirement for commercial properties before they can receive a new or renewal lease and this is being extended to both new and existing commercial leases next year.
Around a sixth (16%) of commercial landlords surveyed said they are planning to sell their properties as they find the new EPC requirements too daunting, primarily as they cannot afford to make the requisite changes. That leaves 74% who need to upgrade their portfolios.
Many landlords are taking steps to upgrade their properties, with 42% of respondents planning to install insulation, while 36% will invest in an energy efficient boiler, and 35% say they will buy newer properties instead of older, less energy efficient properties. Nearly a third (30%) will fit double glazing.
Handelsbanken’s research shows commercial landlords in general are planning to invest in their portfolios over the coming months to improve energy efficiency. The average investment per portfolio is expected to be £95,400, or 3% of the portfolio’s total value.
There is still uncertainty in the market on how to implement changes. The main reasons given among those without a plan, were that regulation makes it too difficult to do so (42%), a lack of knowledge about what changes to make (38%), and not believing that they can access the right finance (14%).
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Barriers against making portfolios more sustainable
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All respondents
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The regulations make it too difficult
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42%
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I don't have enough knowledge about how to make my portfolio more sustainable
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38%
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I don't believe I could access the finance I'd need
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14%
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I don't have the Capex to invest in making it more sustainable
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12%
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Some / all of my property is listed so making upgrades is too difficult
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10%
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Richard Winder, UK Head of Sustainability at Handelsbanken said:
“It is worrying that so many landlords declared themselves unaware of the April 2023 deadline, though there are signs many are taking action, for example by investing in double glazing and extra insulation.
"Although money is getting tighter right now, the rise in fuel costs and further planned hikes in energy efficiency standards make carbon-reducing measures a smart investment for landlords and tenants alike.
"Landlords will want to start by consulting their existing Energy Performance Certificates, to find the most cost-effective route to a higher energy-efficiency rating.
At the same time, we would guide them towards taking a broader, longer-term view of sustainability, for instance by considering a property's resilience to heatwaves or severe weather, and how it might better support green transport choices and biodiversity."
To read about this and other insights, please read the full property survey report:
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Citigate Dewe Rogerson