Making Hay from Carney
Mark Carney’s recent comments about the impact of negative zero and stranded assets have led to quite a few column inches, with the FT’s Lex column (£) on Monday looking at the link to EPC “B” by 2030. Never one to ignore a bandwagon, I thought I would share some thoughts arising from the article and its comments:
- Law versus practice – while there is currently no legislative requirement to hit this target, in practice we are seeing investors and institutions treat it as a requirement in order to de-risk their assets. The comments also suggested a general acceptance that EPC “B” was the new standard.
- Preparation pays off – the article refers to some big players, British Land and Landsec, who have disclosed precise numbers for their transition to net zero. Landsec have set aside £135m for its ‘net zero transition plan’, while British Land estimates approximately £100m is required to bring the 42% of its assets currently sitting with lower than a “B” up to standard. Two thirds of British Land’s costs are expected to be recoverable through the service charge. British Land own or manage a portfolio with an estimated value of £13bn (their share being £8.7bn according to their website) while Landsec’s sits at £10bn. In that context the figures highlighted are extremely reasonable and that will not be down to luck – energy efficiency has been on the horizon and risk register for as long as I can remember, and the best advised and run entities have been working on it for even longer. The hard yards that these institutions and their teams have put in are paying off.
- EPC “B” is not for everyone – the legislation around minimum standards currently exempts various types of properties from the requirement, including importantly where the only improvements that could be done would not meet the seven year payback test (i.e. they would cost more to carry out than they would save in energy bills over seven years). The article does not cover this, but it is an important point to remember amongst all the headlines. We also should not forget that not all occupiers are the same; some rely on the slightly tired or scruffy assets, as they provide options for creatives, start-ups, and businesses that operate on tighter margins in less flashy, but still important parts, of the economy. That diversity is also what makes life more interesting.
Regardless of the moveable legislative feast, in our experience the industry really is grasping this issue and the people involved are motivated to try to improve things for themselves and for future generations. With progress in the last few years I am cautiously optimistic that things may not be as bad as the doomsayers think.
See our Sustainability Page for more on EPCs, MEEs, and the Sector Race to Net Zero.
Subcribe to news and viewsAbout 70 per cent of floor space in England and Wales currently has an EPC rating of C or below, estimates Knight Frank.
https://www.ft.com/content/199acbae-f7ef-475b-90ad-985eb25fe6f6
