Let’s talk

In the current economic climate you might think that environmental issues would slide down the agenda but with the tightening of Part L, talk of green leases at this years BCO conference and the recently updated BREEAM guidelines, it seems it is still a very hot topic. And now with the introduction of energy performance certificates (EPC), things have really got heated.

“The EPD directive is part of a wider strategy the UK and European Union are introducing to reduce energy and carbon dioxide emissions,” begins Andy Merrin, environment manager at Overbury. “But the question is – does the market, and the building occupiers that it will affect, really understand what an EPC is, how it’s rated and why it’s important?”

Awareness in the market

Jonathan Walker, head of projects at investment and development company Great Portland Estates comments; “Government tenants are easily the most informed because they have to be. Large corporate tenants are the next most informed because they probably have corporate responsibility and environmental statements saying they should only use buildings of a particular quality. After that you are into the murk of general commercial office space and there are probably thousands of people out there who only need to know [what an EPC is] when they have to find out.”

Jerry Lehane, director of building services consultants Chapman Bathurst, agrees and says he is often approached by a client that says: “I know I need something, but what is it?”

After “what is it?”, the next most common question about EPCs is “what rating can my building get?”. The answer, says Matt Fulford, sustainability associate at property and construction consultants EC Harris, is likely to be C for the average new build and D, E or F for existing stock. Buildings obtaining planning consent today, however, are more likely to get higher ratings as architects are building energy efficiency into their design. This is mainly because market expectations of the environmental performance of buildings has increased, says Walker. Will expectations grow again by the time these buildings are completed, he asks. There’s a very good chance, “but, what we need is some stability in EPC [legislation] for a few years since it takes three to four years for a decent sized building to come through and for us to see what rating it receives, what works and what we can learn from it,” adds Alex Solk, associate at architects Sheppard Robson.

Could you imagine walking into Marks & Spencer’s offices and them being F-rated?

Matt Fulford, EC Harris

Effect on rental values

The general feeling is that there will be some difference commanded by those buildings that have the highest ratings although this is likely to be driven by occupier demand and the state of the economy to a certain extent. For example, those firms wanting to project a socially responsible image may feel they have no choice but to rent top-rated buildings. “Could you imagine walking into Marks & Spencer’s offices and them being F and G rated? People would say where’s your Plan A gone?” says Fulford.

Landlords and developers see the value in investing to improve the energy rating of their property portfolios if not to command higher rents then at least to ensure their buildings are fully let. Walker agrees: “What is more likely to happen is that they will get let quicker,” he says. “That won’t just be because of the EPC; there may be other visual and performance reasons why it has a C. The perception will be that it is a better building.”

But the incentive to offset against operational costs is only likely to be attractive to part of the market – most likely government or large corporates that take longer leases where they can realise the benefit of lower utility bills, etc.

Outside of this market not all occupiers are concerned with the long-term operational costs of their buildings and may seek out lower EPC rated buildings to try and secure good deals with rent free periods and cheaper rents. “This may open up a whole sub-market for smaller enterprises that have less of an environmental conscience or are feeling the pinch. Firms that are just looking to save money may go for the cheaper rent on a short-term lease, as the payback in operational costs may not be as relevant,” says Merrin.

Fulford says energy costs go up by about £8 per m2 as buildings drop down a band and therefore savings on rents in lower rated buildings would be cancelled out by increased fuel bills. However, as Solk points out, this may be the case for offices in London and the South-east but in the regions and out on business parks where rents are much lower, the increase in energy costs is less likely to have the same impact.

For the buildings we are constructing now, it may already be too late

Alex Solk, Sheppard Robson

Flexibility and collaboration

It is up to developers to work together with their architects and construction team to make sure they are providing a flexible base for potential occupiers. Lehane comments that if a property has a flexible enough technical infrastructure, it can overcome the challenge of being a multi-tenanted or even mixed-use building and provide an effective and efficient environment for all its occupiers.

Ultimately though, it is how the building is occupied, operated and managed that will have the most impact on its efficiency, and therefore its impact on the environment. Greater collaboration between base build teams, fit-out firms, landlords and tenants could help buildings work much more efficiently. Building handbooks, handover sessions between the base build and fit-out contractors and inductions by landlords to explain the workings of the building to new tenants could reduce such wastefulness and improve a buildings performance, says Walker.

Communication is key

Is there too much legislation and can it be communicated more effectively? “Across the whole lifecycle from client to tenant, it’s likely we need to improve this collaboration to maximise energy efficiency benefits. Hopefully legislation will force things down that route,” says Merrin. And it’s true, EPCs are just one of a number of regulations and schemes aimed at making buildings greener. BREEAM and Part L are also trying to make buildings more eco-friendly. So perhaps the future is to somehow improve the collaboration within the project teams in order to develop more joined-up energy improvement strategies.

Communication will be the key challenge. The government needs to give the property and construction industries notice of where legislation is heading. “If they give us that knowledge now we can use it to plan buildings for the future,” says Fulford. But, as Solk warns: “For the buildings we are constructing now, it may already be too late.”