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New E.U. Regs Could Hit Property Values

Posted: 02/11/2005

Controversial plans to name and shame commercial buildings that are not energy efficient could shave millions of pounds off their value. The European Union Energy Performance of Buildings Directive, which aims to cut carbon emissions in line with the Kyoto Protocol, means that commercial buildings in Britain will be given an energy performance rating, similar to those for washing machines and fridge freezers.

According to leading property advisers GVA Grimley the Directive could wide-ranging implications for the commercial property in the UK. Public buildings, including libraries, hospitals and town halls, will be required to display prominently a certificate showing their energy rating. Owners of commercial buildings of more than 1,000 sq m, including office blocks, shopping centres and hotels, will have to make the certificate available to prospective buyers or tenants.

The certificates must include recommendations for cost-effective investments to improve energy performance. About 2,000 inspectors will be needed to test energy efficiency on commercial buildings in Britain, according to the Royal Institution of Chartered Surveyors. It is unclear however, how such a large number of suitably qualified people will be found.

Jon Anderson, a Partner at GVA Grimley's Leeds offices, has warned that the regulations could trigger a big cost to landlords. "We are currently investigating how the new rating will affect the valuation of commercial buildings, many of which are owned by pension and life funds," he said. "The Energy Performance of Buildings Directive will have a huge knock on effect for the commercial property sector and the estimated cost of refurbishing old commercial buildings to win a good rating and the additional cost of making new developments energy efficient will cost billions of pounds."

Pension scheme trustees will be able to request details of the energy rating of buildings occupied by their companies, or the rating of commercial buildings owned by a pension fund as part of an investment portfolio.

EU states have up to three years to implement the recommendations in the directive.

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