New energy rules, a threat to towns and cities across UK

[edit] New research report

New energy efficiency regulations could see the closure of thousands of offices across Britain, plunging towns and cities into a ‘death spiral’ of economic decline and unemployment, according to a new research report from Construction Analysts Barbour ABI.

The report warns that many commercial landlords in regions where property prices are low and demand has faltered may simply decide that it is not worth investing in the changes needed to meet new EPC energy efficiency requirements.

“With high streets already under pressure and levelling up funding yet to make an impact, there is a considerable risk that we will see a significant decline in some towns and cities, with landlords deciding not to invest and meet these obligations,” said Barbour ABI Chief Economist Tom Hall.

[edit] MEES

The Minimum Energy Efficiency Standards (MEES) came into force in April and make offices and other commercial buildings unlettable if they fail to meet an EPC rating of Band E. And it does not stop there - properties must reach EPC Band C by 2027 and Band B by 2030.

Meanwhile, Barbour’s latest analysis of recent commercial and office Repair, Maintenance and Improvement (RMI) planning applications shows numbers were still down 40-50% on pre-COVID levels despite the new regulation.

Almost three-quarters of the office stock in the major UK office markets will eventually be affected, and 56 million square metres of commercial space is already failing to meet current regulations. Areas outside the southeast will be most heavily impacted. The risk is that huge swathes of commercial building stock will sit empty, leaving a blight on our towns and cities.

Contributors, Centre for Cities, analysed data from the Department for Levelling Up, Housing & Communities to find the towns and cities worst affected. Norwich, Northampton, and Leicester have the most commercial property below Band E at 14%. When looking at offices alone, the situation looks worse for Northampton, Huddersfield and Worthing, Leicester, Bradford and Hull, all of whom have more than 20% of building stock below minimum standards.

Barbour ABI found that there had been no indication in recent planning application data that landlords in these areas were taking action to address the issue.

Barbour ABI Chief Economist Tom Hall continued:

“The situation is made worse by other exceptional forces at play, such as online shopping and the shift to working from home due to the pandemic, which is reducing the demand for physical stores and offices in town centres.

“The result is that many towns and cities will struggle to maintain the healthy stock of commercial properties needed to remain economically attractive, trapping them in a cycle of decline that has major implications for the future prosperity of these areas.”

[edit] Stranded assets

Barbour ABI defines these buildings as “stranded assets” that have unexpectedly or prematurely lost value and become a liability to the owner. Stranded assets are caused by rapid or unexpected changes, normally in the market, that prompt shifts in demand. The report compares the current situation with office spaces to the abandonment of factories and coal mines in the 1980s.

“It is clear that targeted incentives in areas where rental values cannot support the investment will be needed,” said Hall. “This will be crucial in locations which otherwise face a dramatic loss of offices along with the jobs and income they provide to local communities.

"This is keenly felt between neighbouring locations. For example, in Northampton, 24% of offices need to be upgraded, compared with only 8% in Milton Keynes. Separated by a mere 20 miles and only a few minutes in journey time on a direct train to major cities throughout the UK, you can easily see how it makes one more competitive and attractive than the other for businesses and investors.

“It’s not just a case of changing the use of these buildings either. Repurposing buildings rather than demolishing them has become increasingly popular due to the implications of embodied carbon. However, turning non-domestic properties into homes does not replace the long-term economic impact of losing commercial space.

“Asset owners and local authorities need to be more creative and make decisions that create the right mix of assets and drive investment and footfall, suitable for the needs of their communities.”

Find out more at barbour-abi.com.

[edit] Worst affected towns and cities table - all commercial property

[edit] Worst affected towns table - office units

This article was issued via Press Release as "New energy rules ‘threaten towns and cities across UK’" dated May 3, 2023.

[edit] Related articles on Designing Buildings

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• Energy efficiency regulations: The challenges for landlords.
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• Energy targets.
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• High street (planning and policy).
• Is Turning Office and Retail to Residential Housing the Future of the High Street?
• Long-term investment scenarios LTIS.
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• UN Sustainable Development Goals.

--Barbour ABI 13:43, 05 Jun 2023 (BST)

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