Dec

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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