MEES: Commercial landlords set to lose £750m a year if they fail to improve EPC ratings

Corner of commercial real estate building

Commercial landlords in England and Wales are set to lose the equivalent of £750m a year in rental income if they fail to comply with the Minimum Energy Efficiency Standard Regulations (MEES).

This is a key finding of the latest research by property data insight consultancy Search Acumen which found that nearly 18,000 commercial leasehold properties have not yet met the MEES requirements. Offices was revealed to be the worst-performing sector. 

MEES came into effect in April last year, prohibiting landlords from leasing buildings with an EPC rating below E. By 2030, commercial buildings must have an EPC rating of B. If landlords are unable to comply with these requirements, their assets will be unlettable.

Search Acumen’s research found: 

  • Offices were found to be the most likely property type to be non-compliant, with almost 8,000 rated F or G. Some 13% of offices were rated A+, A or B.
  • Hospitality posted the highest proportion of A+, A and B-rated properties (27%) and the lowest percentage of F or G-rated buildings (2%).
  • Just 12% of buildings in the education sector were rated as A+, A or B, despite only having 2% of buildings rated F and G.

Search Acumen’s researchers estimate that it will take until 2038 for commercial leasehold properties below a B rating to meet the 2030 MEES standards, meaning the sector will miss its regulatory deadline by eight years.

Based on average rental values, landlords with EPC ratings of F or G across England and Wales would see £750m in potential rent lost in each of these years.

ACUMEN RESEARCH

The rate of progress slows to 21 years from now when factoring in property types beyond those that are rented, such as those for sale and under development. This means it could take until around 2045 before all commercial properties in England and Wales are fully compliant and rated at B or above.

Search Acumen said that this timeline had worsened from August last year, when it was forecast to take 15 years. Commenting on the research, Andrew Lloyd, Director of Search Acumen, said: “Complacency in energy upgrades will continue to hamper yield and transactional growth – now is the time to act.”

However, researchers pointed to signs of positive change. In the past nine months, there has been a reduction of just over 1,000 properties rated F or G, equalling a £250m saving since their landlords can now legally rent them out.

Since the MEES came into effect, around 5,000 properties have had their ratings lifted to meet the minimum requirement.

How does Priva support commercial landlords?

Priva’s cloud-based building management solutions help to boost the efficiency and sustainability of commercial buildings.

We welcome conversations with commercial landlords commercial real estate operators or managers who want to make their buildings more energy efficient, smarter and intelligent. 

Please drop us a line if you’d like to discuss your energy challenges.

Photo credit: April Pethybridge on Unsplash

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