Almost 10% of inner London’s commercial buildings will be “unlettable” from April following changes to the Minimum Energy Efficiency Standards.
Echoing a study by EG last year, BNP Paribas Real Estate has concluded that 8% of inner London commercial stock will be “unlawful for new lettings and unlawful to let” from April this year.
It added that up to 50% could be unlawful to let from April 2027.
And a further 26%, with an EPC rating of C, could be unlawful to let from April 2030.
The study concluded that just 23% of inner London stock is rated A+, A or B and is fully MEES-compliant.
Donna Rourke, head of ESG and sustainability at BNP Paribas Real Estate, said: “Many landlords are still in the dark about MEES changes. For others, there is a trade-off taking place with their occupiers on where the lease obligations lie in undertaking works. It is crucial at this time to get works done and get it right, and given that there are such disparities between ratings, ensuring you consult with an expert is more important than ever.”
MEES will apply to all privately rented property, making it an offence to continue to let a commercial space with an EPC worse than an E, even in the middle of a lease term.
See also: Grappling with the MEES exemptions
The need for improvements could not come at a worse time, with the cost of construction materials having risen by 11.2% last year. The latest figures from the Department for Business, Energy and Industrial Strategy show costs for non-domestic property construction rising by just under 15% in the same period.
Crucially, the construction material seeing the largest price increase over 2022 was building insulation, which has soared by 38.6%.
Stephen Wolfe, head of commercial at BNP PRE, said: “ Across London, the market and competition for occupiers is hot, putting the value of assets at an even greater threat. This is no time for landlords to sit on their hands, even super prime asset values are coming down, but further discounts will be expected if your space isn’t up to scratch.”
See also: MEES: Don’t bury your head in the sand
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