Commercial tenants could soon be driving landlords and their investors to make energy improvements to their properties.
The Green Deal is currently optional, but by 2016 tenants can request energy efficiency improvements which landlords cannot unreasonably refuse and can result in a fine for non-compliance.
The government is supporting businesses (and householders) to make energy improvements with the Green Deal, launched in January 2013. The Green Deal Plan (GDP) is a financing mechanism to provide the up-front capital investment needed to retrofit existing buildings to make them energy efficient. Using upfront capital provided by grants, landlords can pay for the investment over time through the building’s energy bills.
According to Michelle Giles, head of carbon & energy at IMServ, one of the UK’s largest independent energy management providers the tide has changed and the tenant is now in the energy efficiency driving seat: “With little chance of energy costs decreasing and an abundance of available commercial properties on the market, the energy efficiency of a commercial rental is becoming increasingly important to prospective tenants,” Giles explains.
“The tenant can not only choose the location and on-going service but also compare the reduced rates and on-going costs, including gas and electric.”
There are a few hurdles that commercial properties will need to address warns Giles, namely “The Golden Rule” and all-party consent. The Golden Rule is that the expected financial savings must be at least equal to the investment over the length of the payment period and cannot exceed the expected life of the measure.
“This can be a big challenge particularly in all but the worse performing buildings,” continues Giles. “The other key requirement is the all-party consent. This is relatively straight-forward for domestic landlords and tenants but for commercial properties with multiple parties and the complexities of numerous contracts this could be a show stopper.”
However, she points out there are other ways of achieving energy savings and reducing energy wastage before any expensive physical upgrades are considered such as installing remote thermostats and lighting controls. Also, programmable monitoring and control devices designed specifically for building energy management of smaller premises can also make significant reductions in energy use and CO2 emissions.
“Energy savvy landlords are not just those that look into the Green Deal, but look for a solution that is right for them, their building stock, their clients and, their return on investment. In just three years’ time, tenants can request energy efficency improvements and landlords will have to oblige, therefore it’s imperative to start working towards this goal, ” concludes Giles.
IMServ will be hosting a free one hour webinar on 11 June in which Michelle Giles will be offering advice on how to turn the burden of legislation into a bonus for landlords profits.