A fifth of all British office buildings risk becoming unlettable within five years as a result of new energy efficiency measures that pose a threat to the value of property investors' portfolios.
From April 2018, landlords will not be permitted to let out the least energy-efficient buildings, as measured using energy performance certificates.
EPCs measure the energy-saving capacity of properties, looking at criteria such as thermal insulation, lighting and electrics. The rankings run from A to G and around 20 per cent of offices fall into the F and G categories to which the new rules will apply, according to figures from the Department for Energy and Climate Change.
Buildings are the third-largest contributor to Britain’s carbon dioxide emissions after power generation and transport, accounting for 18 per cent of all UK emissions, according to the Carbon Trust.
Graeme Murray, head of sustainable engineering at property consultants CBRE, said the changes were already having an effect on property values. “You are already seeing EPC ratings being factored into transactions,” he said. “Informed investors and informed purchasers know.”
The rule was first announced as part of the 2011 Energy Act. A consultation on how it will be implemented recently closed and the government will announce detailed plans later this year.
Religious and agricultural buildings, smaller properties and listed heritage sites may be excluded from the rules, which might also be restricted to new tenancies for five years, before being rolled out to existing leases in 2023.
Mr Murray said lack of clarity from the government means the property market is not yet expressing the full impact of EPCs. “The full effects on property value may not be seen until next year.”
David Goatman, head of energy and sustainability at property consultant Knight Frank, said not all landlords were taking steps to address the legislation: “Bigger property owners with in-house compliance teams are coming to us, but smaller individual landlords might not even have assessed their assets yet, let alone quantified the potential impact on value.”
According to figures from the British Property Federation, about 80 per cent of British office buildings are more than a decade old.
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