Energy-inefficient properties could burn £370m hole in pockets of London businesses
Some 11.9 million sq ft of energy-inefficient stock is set to arrive on the central London office market over the next three years, burning a £370m hole in businesses pockets.
According to a new report by CBRE, a staggering 94 per cent of stock set to return to the capital’s office market has an EPC lower than C, and is therefore categorised as energy inefficient.
The real estate advisor predicts the cost of upgrading this stock- which will be released because of lease endings – to energy efficient standards could be up to a whopping £370m.
To be classed as environmentally friendly a building typically has to have a rating of either A or B.
Analyst at CBRE said that if the 11.9m sq ft is not upgraded to higher energy efficiency standards it “will experience a sharp fall in capital value”.
“We expect upgraded stock to have more resilient capital values,” they added.
Under government regulations, office buildings must have an EPC rating of at least E before they can be granted a new lease or a lease renewal.
Toby Radcliffe, sustainability research lead at CBRE UK, said: “The growing importance of energy efficiency and sustainability credentials to occupiers, investors and lenders is adding to the imbalance, with demand targeting a limited pool of high-quality, more sustainable office space.
“Offices that undertake the upgrade work to bring energy efficiency up to a high standard could benefit from the flight to quality that is sustaining demand for the best offices in London.”