87% - in excess of a billion sq ft – of office stock in the UK’s major office markets will need to be improved by 2030 to meet the minimum standards required for a Grade B Energy Performance Certificate (EPC) set by the Government in its 2021 Net Zero Strategy. This is according to new research by Savills, released ahead of the COP26 climate change summit.
Clare Bailey, director of Savills commercial research team, comments: “Offices are ahead of many other real estate sectors in improving energy performance. This is due to a large proportion of assets being held by institutional landlords with their own ESG strategies, who are mandating and financing large-scale improvements as part of a model where investors have always factored in the costs of obsolescence to ensure their assets continue to be lettable. This means that in certain parts of the market, for example the City, up to half of the entire stock has been refurbished or redeveloped in the last 20 years meaning that it has largely kept pace with changing regulatory requirements. Nonetheless, significant further work is required to improve the UK’s office stock, particularly in locations where landlords are currently unable to raise rents to cover the upfront cost of improvements.”
Savills says that instead of landlords considering whether occupiers will pay a ‘green premium’ for occupying the most sustainable office space, the conversation should be around the direct impact such a building can have on a tenant’s business. For example lower energy bills, reputational benefits, improvements to the health and wellbeing and lower costs would benefit the tenant in having to off-set any residual carbon emissions whereas for landlords, the benefits are likely to come in higher occupancy rates as tenants look for the best-performing space, and again reputational advantages.
Read Savills Real Estate and the Carbon Challenge report here
Notes to editor:
Savills recognises real estate is responsible for 40 per cent of carbon emissions and, to coincide with COP26, it is launching its latest research examining how the sector is adapting to meet climate change challenges. Savills is committed to achieving net zero carbon in its operation by 2030. Through Savills Earth it brings together the expertise of more than 100 specialists to support and advise clients on their sustainability, energy and carbon strategies. Visit Savills Earth to find out more.