Will you pay more for a greener building?

A recent survey by the CBI and GVA Grimley showed considerable interest from businesses in occupying "green" buildings and suggested that over 60% of businesses would be prepared to pay higher rents to do so.  In France a 71,000 square metre zero-carbon office is under construction, for which tenants will be paying higher rents, but in return they will enjoy major savings in energy costs. 

There has been a lot of publicity recently on zero-carbon residential properties, but the Government is also looking at new ways to make commercial buildings zero-carbon too.  As part of this, from April 2008 new rules on Energy Performance Certificates (EPCs) come into force for commercial buildings.

An EPC measures the energy efficiency of a building.  Buildings will be rated between A (the most efficient) to G (the least efficient). 

From 6 April 2008 all new or let buildings of more than 10,000 square metres must have an EPC.  From 1 July 2008 this will also apply to all commercial buildings of more than 2,500 square metres, and will then apply to all commercial buildings from 1 October 2008.

The new requirement for an EPC will be triggered on the completion of a new building, on the sale of a property or on the grant of a lease or sublease.  It is anticipated that the certificates will cost a least £1,000 each, and they will be valid for 10 years.

The effect on rents has yet to be seen but it is expected that a low EPC rating may have the effect of depressing the rental value of a property due to increased running and occupation costs, and may decrease its appeal to investors, whereas a good EPC rating is likely to have the opposite effect.

The end of Empty Rates Relief
The owners of warehouse and industrial premises have been used to enjoying  100% business rates relief while such properties are vacant, with the owners of other vacant commercial properties having up to three months of 100% relief from business rates, followed by a reduction of business rates by 50%.

From 1 April 2008, this will all change.  After this date empty warehouse and industrial premises will only have 100% business rates relief for the first six months, and other vacant commercial properties will have only three months of 100% rates relief.  After those periods have expired, full business rates will be payable by the owners of all empty commercial properties. 

Property owners are searching for ways to mitigate this liability, from challenging previously uncontested rating assessments to considering short term flexible lets to occupiers.  Owners are also considering schemes for demolition of buildings or for disconnecting services to make them unsuitable for occupation - but the question is whether any of these schemes will actually work?  Any schemes are expected to be subject to close scrutiny by the local authorities and should not be considered without proper advice.

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