The Commercial property net-zero deadline may be closer than you think

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There’s likely to be a regional offices ‘re-fit race’ if some local authority civic leaders get their way.

According to Jeff Pearey, head of regional office agency at JLL, over 300 local authorities have declared a climate emergency. Of these he says, many are now setting targets which are far more ambitious than the Government’s own, to make their cities net-zero ahead of the Government’s target of 2050.

Birmingham, Bristol and Cardiff by 2030, and Manchester and Leeds by 2038, these city authorites have variously intimated that they are aiming to achieve the Government’s target of net zero in the next decade.

The UK itself, strengthened by its COP26 resolve, is among the first advanced economies in the G7 to commit to the ambitious target of becoming net-zero by 2050. But these city civic leaders are aiming to get there much sooner, which has serious implications for property owners in these locations.

It’s a daunting task ahead

The task ahead, if these targets are to be met, is daunting:

“It’s not an exaggeration to say that significant action is needed now to ensure these targets have any hope of being achieved.

“Buildings account for 40% of total carbon emissions on average, but this figure is much greater within our major regional urban centres,” says Mr Pearey.

A key battleground in the war against emissions will be the built environment with Manchester at 69%, Birmingham 68% and Glasgow 66%. It’s only Bristol, at 45%, that’s closer to the benchmark Mr Pearey says, writing for The Daily Telegraph.

Offices a key target

Office buildings are a key target to get emissions down, the JLL analysis shows. There’s patently a “huge task” ahead for councils, investors, and developers.

JLL looked at the energy performance of commercial buildings in eight key regional markets (Thames Valley, Bristol, Cardiff, Birmingham, Manchester, Leeds, Glasgow and Edinburgh), which included included the Energy Performance Certificate (EPC) rating of these buildings.

Currently there is a proposal and consultation by Government that EPC ratings for commercial office buildings should reach a minimum standard of ‘B’ by 2030. But currently according to the JLL study, 90% of office buildings fall well short of this rating which means there are millions of square feet of space needing major refurbishment to reach a satisfactory level of energy usage and sustainability.

There is currently much work in train already, refurbishing and in many cases repurposing buildings, but to meet the targets it will mean that around 5% of the available space will need to be upgraded every single year from now to those deadline dates. It will mean a doubling of the amount of redevelopment and refurbishment work achieved over the last decade and a considerable hike in development costs for owners.

Private / public partnerships needed

Mr Pearey suggested that local authorities need to work in partnership with owners, establishing formal partnerships to tackle older stock and develop action plans with investors to identify opportunities to reduce energy intensity.

Councils he suggests can “act as a locus for knowledge sharing and best practice across local investor communities.” especially when properties might be owned by smaller commercial landlords without the resources behind them that would be expected of larger REITs or multi-city players.

Will require substantial investment

As Jeff Pearey says, and this goes for all commercial landlords, and private buy-to-let landlords with residential stock as well:

“Ultimately, property investors will have to stick their hands in their pockets to upgrade stock. Occupier demand and regulatory pressure will act as a stick, but the scale of the task our research identifies suggests that the cooperation of local councils will be needed too – and they can provide the carrot.”

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City’s HMO plans will ‘price students out of market’ warns leading landlord

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Tough new plans for Leicester’s PRS risk ghettoising neighbourhoods and pricing poorer students out of the market, says a leading student lets firm.

Leicester Council recently announced proposals for an Article 4 direction to cover more parts of the city to prevent more HMOs being created and is also consulting on licensing scheme options – and both look likely to take effect next year.

CEO of local student landlord and letting agency Sulets, Irving Hill (main pic, inset), believes that if they get the go-ahead the city will end up like Nottingham where it’s hugely difficult to find student lets.

“Students like living in traditional HMO accommodation and a recent Unipol study showed that purpose-built accommodation is 40% more expensive,” he tells LandlordZONE.

“If the council stops more houses being converted into HMOs by using the Article 4 directive it will have a direct impact on students, restricting choice and driving up the price so that poorer ones are priced out and won’t have anywhere to live.”

Fees hike

The council is considering charging £1,000 for a five-year licence for smaller HMO landlords in certain areas of Leicester – much higher than the average fee of £708, according to Kamma data.

Hill says that being forced to pay the licence fee will force even more landlords out and shrink the pool of available properties, particularly the smaller ones.

Says Hill: “Restricting new entrants is also a bad idea as it’s already really difficult to get approval to convert properties into HMOs.”

He adds: “Councils know they need students but they don’t want them in residential areas because some people complain about them, so they’d prefer them to go into purpose-built accommodation – that’s why these blocks are going up so quickly. However, this just ghettoises areas.”

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SECTOR warned after landlord fined £20,000 over shocking fire safety breaches

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Tenants living above a takeaway were evacuated during a fire inspection as inspectors were so concerned about their welfare, a court heard.

London Fire Brigade has highlighted the case of landlord Mr Jin Zhang who was ordered to pay more than £20,000 for safety breaches in the flats he owned in New North Road, Islington (pictured).

The tenants on the first and second floors of the building could only escape via a single staircase to the takeaway, which had a metal shutter over the front when the shop was closed.

Inspectors visited the takeaway after concerns were raised by one of the tenants and then the council, particularly about the lack of a fire alarm system.

They found that fire doors had been removed on the ground floor, there was no emergency lighting and no fire alarm. The tenants were evacuated immediately and Zhang was later charged with six offences under the Regulatory Reform (Fire Safety) Order.

Assistant commissioner for fire safety Paul Jennings (pictured), says: “Although the shutter at the front of the restaurant was not locked at night, the residents would still have had to open it before being able to escape during a fire which is completely unacceptable and could easily have hindered their ability to get out quickly.

He adds: “There’s no excuse for leaving people’s safety to chance, especially when information is so readily available to those with responsibility for safety in buildings to understand what their duties are and ensure they comply with the law.”

City of London Magistrates Court fined Zhang £500 for each offence and ordered him to pay a victim surcharge of £50 and £17,335 in costs.

Read more about fire safety regulations.

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LATEST: Mortgage lending to landlords jumped by 83% this year

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The value of buy-to-let lending jumped by 83% this year to £18 billion when compared to 2020, trade association UK Finance has reported.

Its data shows the landlord market for both new purchases and remortgages rebounding strongly this year, although this hyperactivity is likely to return to more normal levels of approximately £13 billion next year and £12 billion in 2023.

But the overall growth in the buy-to-let market is highlighted by these latest figures and for example in 2010 loans totalling just £5 billion were approved for landlords, despite the additional tax and regulatory burdens they now face.

“It is true that buy-to-lets aren’t the bargain that they once were,” says Miles Robinson, Head of Mortgages at broker Trussle (pictured).

“Changes to tax and the Stamp Duty Surcharge have impacted returns, which made rental the king of investments.

“But this new data shows that property is still seen as a safe and reliable way of generating extra income. This can be both in the short term, through rent collection and long-term gains in house prices.”

Robinson reckons part of the reason for buy-to-let lending growth this year has been a surge of landlords switching to student lets.

“Student rental properties especially remain an attractive proposition for investors, with recent research revealing that student buy-to-lets consistently outpace the rest of the PRS market, by as much as 17.86% in rental yield,” he says.

“Our own research has also revealed that 66% of parents are considering purchasing a buy-to-let property near their child’s university to alleviate living costs during their studies, whilst 53% of parents would consider downsizing to help support their children through university.”

Read the UK Finance report in full.

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INTERVIEW: Legislation is hitting Welsh landlords hardest, says leading investor

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One-size-fits-all legislation is hitting Welsh landlords particularly hard, according to one of the country’s more successful property investors, who believes it’s having an irrevocable impact on the sector.

Alexlouise Thomas, who has been in the business for almost 20 years and has 14 properties in Wales, says the government is working against landlords who want to offer good quality, affordable housing.

“There’s a lot of unintended consequences to the legislation that’s being introduced, as a landlord in London is different to a landlord in Wales,” she tells LandlordZONE.

“Many Welsh landlords just don’t have the resources to become a limited company or pay for Rent Smart Wales registration. House prices and incomes are lower, rents are cheap and many of the landlords are small.”

After training as a chef, Alexlouise started investing in property aged 22 and rapidly grew a 19-strong portfolio. But while hosting cookery demonstrations, she realised she was giving diners more advice about houses than cooking, and her property education business was born – Rock Solid Moneymaker.

It’s grown into a successful mentoring scheme that focuses on financial security and has spawned joint ventures involving some of her trainees as well as an upcoming book.

Limited company

She recently transferred her property into a limited company as a way of making it more tax-efficient, but acknowledges that many smaller landlords don’t have that luxury.

And with energy efficiency targets looming, many will be hit disproportionately hard when faced with retrofit bills, says Alexlouise, while some are also getting big tax bills. “They’re realising the property isn’t making them money anymore.”

As larger joint ventures and companies can share the tax and legislative burden, the result will be fewer smaller landlords, she adds.

“It’s sad that the current climate is removing the ability for someone to build a bit of wealth by buying one property to rent out, however, it could mean it will become a more professional sector. We should now be having conversations about the solutions as well as the challenges ahead.”

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Landlords who agreed tenancies via Purplebricks could be liable for large tenant payouts

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Hi, my name is Melissa Lawford, and I am the property correspondent at The Telegraph.

I’m writing about how landlords who arranged tenancies via Purplebricks could now have to make large payouts to their tenants because they were not served necessary legal (prescribed) documents about their deposits.

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