Some improvements will cost more than four years’ rental income

Industrial units with low energy ratings could be rendered obsolete due to the cost it would require to improve their energy efficiency under new government regulations, research has revealed.

The Energy Act will make it unlawful to let buildings with an energy performance certificate of F or G after April 2018.

According to research prepared for Building by Sweett, an industrial unit in poor condition could cost the equivalent of 65 months rental income outside London and 53 months in London to bring it up to an E rating, which would allow it to be let. 

Other F or G building types are much cheaper to bring up to an E rating, with the energy efficiency improvements required for an office building or retail warehouse in London costing a month’s rent, the research found.

Patrick Brown, assistant director at the British Property Federation, said buildings that needed the equivalent of 53 months rental income spent on improvements would become obsolete.

He added the property industry was still waiting for the details of the policy. He said: “Until that detail is forthcoming it’s going to be difficult to say what impact this will have on industrial buildings.”

Charles Woollam, partner of SIAM, an adviser on sustainability issues for investors and co-author of the report, said the impact on the value of industrial units that needed the equivalent of 53 months’ rent for energy efficiency improvements would be significant. “For institutional investors the appeal
of these buildings will disappear because of that risk,” he said.

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