The new objectives of the MEES would require doubling the rate of renovation of commercial properties | Insight

This will make it illegal to let any non-domestic property in England and Wales with an EPC of ‘C’ or less, unless it has specified exemptions.

This regulation reflects the UK government’s intention to significantly reduce the environmental impact of real estate in order to meet its legally binding commitment to net zero by 2050.

The government estimates that there are 1.8 million non-domestic premises in England and Wales. Approximately 1.1 million (60%) of these are leased and therefore fall within the scope of the MEES. Ensuring that they all have a CPE of “B” or better in less than eight years is an ambitious goal.

Since the introduction of EPCs in 2008, only 119,000 EPCs at level “B” or above have been issued. Only 11% of the total stock will be affected by the new requirement. Thus, the number of “B” or higher EPCs issued must increase significantly over the next eight years if the entire stock is to meet the 2030 target.

To determine if the industry is on track to meet the goal, CBRE forecast EPC issuance through 2030. This forecast does not take exemptions into account. Over the past five years, the issuance of EPCs rated “B” or above has grown at the rate of 19% per year. This is a welcome acceleration, but we estimate that if we continue at this rate, 60% of all non-domestic stock would still have an EPC of “C” or less in 2030, making it unletable.

The industry is clearly not on track to meet the 2030 target. So what would it take? We calculate that the issuance of EPC “B” or higher certificates must increase by at least 41% every year if the 2030 target is to be met. This means that more than 340,000 or more “B” EPCs are expected to be issued in 2030 alone, more than 20 times more than in 2021.

It looks like we have a mountain to climb, but there is evidence that we are climbing it. A similar forecast we shared with CBRE clients a year ago found that by the end of 2020, 70% of the stock was on track to be unlet by 2030. A year later, the figure is 60%, suggesting a marked acceleration in renovations.

However, there is still a long way to go to reach the 2030 target. The average annual increase in the issuance of EPC “B” or higher certificates that we have seen over the past five years still needs to more than double. Landlords must more than double the rate at which they implement energy efficiency improvements in their buildings if they are to avoid the obvious risk to rental income from 2030.

Kaela Fenn-Smith is Managing Director of Sustainability and ESG Services for the UK and Ireland at CBRE

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