Although welcomed by most, the government’s decision to review EPC regulation timelines has left thousands of landlords in limbo. That applies especially to those with an EPC due to expire in the next 12 months, who will be unsure of the precise level of investment required to future-proof their buildings.
However, as the data around freehold sales shows, the direction of travel in commercial terms is clear, and it is likely that legislation will be brought in to act as a stick to the carrot offered by the market itself. So for anyone looking to renew an EPC in the next year, which would remain valid until 2034/35, there is a strong incentive to be aiming for those top two grading bands.
According to exclusive data from EG Radius, there are more than 66,000 EPC licences set for expiry in the next 12 months across England and Wales. At first glance, the job of work ahead seems a daunting one, but diving more deeply into the figures does offer grounds for encouragement.
Of all licences up for renewal, just 10.9% are grade B or above (see chart 1). In fact, there are more certificates currently below grade E – the minimum current standard required by EPC regulations – than there are at grade A or B, which, until a few weeks ago, had been the proposed target for all commercial property by 2030.
However, the picture is slightly more encouraging when these figures are applied to the floorspace covered by these licences, rather than the number of licences themselves (see chart 3).
Across all sectors, almost a quarter of all floorspace is already at EPC grade A or B, which – given that these certificates were issued up to a decade ago and before grade B was set as a target – is a strong start.
Almost 60% of floorspace up for renewal in the next 12 months lies in bands C or D, suggesting that making improvements to reach the top two grades is not out of the question for the majority of commercial space across England and Wales.
A breakdown by sector also offers grounds for optimism (see chart 4). The standout performer is the industrial market, where more than 10% of floorspace is currently at grade A or above.
Interestingly, some 22,500 sq ft of industrial space set for renewal is currently graded at A+, meaning that its carbon emissions were at negative levels when the building was assessed. Industrial stock enjoys a great advantage in this area in that it typically has more roof space upon which solar panels can be installed, which is definitely an area for consideration for landlords facing EPC renewal.
The retail sector, meanwhile, has the highest proportion of licences due to expire in the next 12 months already at grade B or above, while the office sector has the lowest. For both industrial and retail, the most popular grade band is C, while for offices it is D.
The vast majority of floorspace lies in these middle bands, and the task ahead should not feel insurmountable. Many landlords will already have taken EPC-boosting measures such as making the switch to LED lighting.
Further steps around heat pumps, energy source, insulation and heating control will also send buildings up through the grade bands, so despite not knowing quite when, or if, grade B will become the minimum, those landlords with space up for EPC renewal would be well advised to aim for it now.
To access the insight behind these figures, speak to a member of our team who can show you what EG Radius can offer.