Landlords unprepared for Energy performance certificates

Copyright: David Lawson

First published: Property Week April 2008

The biggest change in the property market for half a century took place a couple of weeks ago. You must have noticed.  No? That seems amazing, considering the years of chatter, yards of newsprint and endless warnings about E-Day – the moment when buildings are exposed as energy guzzling, earth destroying blots on our children’s future.  Every major building must now go through stringent checks when built, sold or let to qualify for an energy performance certificate [EPC] – much like the coloured bar charts on new fridges and cookers.

  But there are not many buildings bigger than the 107,600 sq ft threshold and their owners are usually sophisticated operators with legions of consultants to keep them in touch. Everyone else is waiting for the bulk of commercial property to be drawn into the eco-net in July and October.  Will everyone be more in touch by then?   The signs are not good. More than half the country’s landlords, occupiers and developers are unprepared, according to building consultant CNP and lawyer DLA Piper, which has been travelled the UK with a roadshow outlining EPC duties.

  Perhaps they just don’t care. Around a half those questioned believe the certificates will have no short-term impact, although almost as many suspected it would become harder to market energy-guzzlers over the years. But who cares what happens in the long term? The property industry rarely looks beyond the next deal.Big names have made a big fuss: Hermes, the Prudential, Land Securities and British Land stand out among investor developers, while occupiers like Sainsbury and Marks & Spencer have become regulars at every eco-conference, competing for which has the greenest credentials.

  Compare that to one mid-sized developer at the recent Ecobuild conference who grumbled that EPCs are: ‘Just another piece of bloody paper to go with all the other pieces of bloody paper that clog up every bloody deal.’ Anonymously, of course. Questioning the green tide is akin to doubting international aid or the ban on smoking.   

  Green surfers are happy to predict revolution. Cal Bailey, development director of building services provider NG Bailey, says the property market is ‘on the cusp of the biggest change in 50 years.’ He sees a straight comparison with kitchen goods, where inefficient fridges and washing machines disappeared when energy certificates came in.  Today’s winners are the Scandinavians and Germans who switched early to high-scoring machines, with very little increase in manufacturing costs. Property will follow the same path, with developers being branded according to their treatment of energy, he says.

   But a thread of scepticism still runs through even the strongest supporters of change. King Sturge research guru Angus McIntosh has been banging the drum for sustainable property for years but believes EPCs will make 2008 the ‘crunch year’. Yet he admits they are deeply flawed. They don’t measure energy used in construction, travel to and from buildings nor the amount occupiers use. No-one is sure what penalties may be imposed if no EPC is included in a letting or sale. Landlords might choose to pay fines if they are less of a burden than upgrading.

  Just inspecting space will be an unwelcome extra expense.  Fabien Joly de Bresillon, of environmental management consultant Bureau Veritas, estimates an EPC for an average 10,000 sq ft building could cost around £1,500. Inspectors have to check details like wall construction and boiler efficiency then punch the information into a computer to generate a rating of between A and G, much as is happening on homes.

  New buildings will be relatively easy, as this information should be on record, but a Fifties block could take up to a month’s work to track down data. This presupposes there is someone to do the work. Fees will not be sufficient to generate swarms of new inspectors, says McIntosh. Consultants will try to fill the gap in the hope of attracting spin-off work rather than covering their costs.

   De Bressillon, who has set up a team of up to 10 inspectors, sees the main task as drawing up ways clients can upgrade buildings rather than merely providing them with scores.  But he fears there will not be enough experts to handle thousands of transactions once all commercial space is drawn into the system.  Barely a few hundred were set to be accredited by this month’s deadline, mainly because it takes time and money to qualify in multiple skills including building structure, boilers/ventilation and IT.

   He anticipates another easing of rules like the last-minute move which exempted property from EPCs if it was on the market before the April 6th E-Day.That will only postpone the pain, however. Boiler efficiency inspections come in next, and de Bressillon suspects rules on how occupiers use energy could be on the cards, modelled on much tougher certificates for public buildings which also come in this year.