Be lean, be clean, be green

De-risking investment for commercial landlords

The government's new environmental standards for commercial buildings are going to have an impact on all landlords. And more and more businesses are focused on how they perform environmentally, so they're increasingly looking for green buildings to operate from. This means commercial landlords need to start looking at how they can improve energy efficiency and cut emissions in the buildings they own.

New laws were introduced in April 2018 to prevent commercial buildings with an Energy Performance Certificate (EPC) rating of F or G being rented out under new letting agreements and from 2023, it will be illegal to continue to rent out buildings with this rating at all. So even if you have an existing tenant in place with a rental agreement that extends beyond that date, you'll have to invest in energy-efficiency measures to raise the rating.

In April 2019, the government also announced further measures to manage emissions from the commercial buildings sector and a consultation on how to reduce them and drive improved energy efficiency is expected soon. This new consultation is part of the government's Clean Growth Strategy, which aims to support UK businesses to improve energy productivity by 20% over the next decade. With around 60% of commercial buildings being let rather than owned by the businesses occupying them, this means that commercial landlords are going to have to invest in energy-efficiency improvements.

Beyond meeting the government's goals, making these investments will make your commercial buildings more attractive to tenants as these measures will reduce their running costs. BREEAM accredited buildings with strong environmental credentials will likely be given preference in planning processes too and energy efficiency is one of the most important factors in BREEAM assessments. Additionally, research shows that a BREEAM-certified office in the UK can generate an increased rental rate of 28% compared to a non-certified office. For resale rates, the figure is 24%.

So what should your first steps be in improving your buildings' environmental credentials?

Step 1 - Be lean. Improve energy efficiency and deliver a 10-15% energy saving through initiatives such as:

·         LED lighting upgrades

·         Building Energy Management system (BEMs) optimisation

·         Planned Preventative Maintenance (PPM) and scheduled maintenance

·         Installing Variable Speed Drives (VSD) to reduce energy costs of fans, pumps and air compressors.
 

Step 2 - Be clean. Use smart energy centre solutions to deliver around a 25% energy saving, such as:

·         Ectogrid, which is an innovative, low temperature heating and cooling network

·         CHP (Combined Heating and Power) plant to improve efficiency of heating and hot water provision.

 

Step 3 - Be green. Invest in on-site renewable energy solutions, delivering another 10% energy saving, such as:

·         Photovoltaic panels

·         Heat pumps

·         Battery storage

 

Entering into an Energy Performance Contract allows owners and landlords to make these types of investments into their buildings' infrastructure without having to find the capital while guaranteeing the energy saving. E.ON's approach de-risks landlords' investment, providing peace of mind through an assessment of your building's needs and the measures you need to take to invest in your energy infrastructure with a low-risk, no capital investment, quick return solution.

Written by John Walsh

John Walsh has more than 20 years’ experience across the energy industry and currently leads a team of Strategic Account Managers in E.ON’s Business and Community Solutions division, building long term relationships with large industrial and corporate customers to help them improve their energy efficiency and stay competitive. John’s qualifications include Postgraduate Diplomas in Marketing from the University of Salford and in Management Principles from the JHA Academy.