Office Landlords Could Still Be on the Hook for Eco-Upgrades
Residential buy-to-let landlords breathed a collective sigh of relief over the government’s recent EPC U-turn, but there was no such respite for office landlords.
The announced U-turn referred to private rental properties and did not mention commercial buildings for purposes such as offices or retail space.
Under current guidelines, commercial properties for let must possess an EPC rating of E or above. The government has put forward that in 2030, all commercial buildings must have an energy rating of A or B to be legally let out. This proposed jump will mean significant and costly changes will have to be made to most UK office buildings quickly.
Read on for more information on energy efficiency rules when investing in properties.
Energy Efficiency Remains High on the Agenda for Property Investors
The deadline may still be pushed back, but with no plans being clarified by the government, commercial landlords are calling for more certainty on the issue.
According to PwC, of nearly 60,000 offices in Britain, almost 90% have an EPC rating of C or lower.
Regardless of the EPC laws, the shift towards energy efficiency amid climate worries and the government ambitions for net zero by 2050 means going greener will still be high on the property industry’s agenda.
With increasing demand from the industries that rent office space, eco-friendly buildings are becoming popular. Businesses use energy-efficient offices to meet environmental targets and make the workspace more attractive to employees, adjusting to the back-to-office trend. If you have wondered what the best place to buy investment property is, why not read our free property guide.
Many investors are upgrading their buildings despite government announcements to stay ahead of the curve and future-proof their investment in the case of more sudden deadlines. Others opt for eco-friendly new builds instead of attempting to carry out pricey retro-fittings on older properties.
Read our guide to different property investment strategies for more details.
Is Commercial Property or Residential Property More Attractive?
Commercial property is attractive to investors for a few reasons, such as higher returns than residential buy-to-let, fewer ongoing costs, and the fact that most businesses usually stay in one office building on a long-term basis, guaranteeing regular income.
However, there can be longer void periods, as it is more difficult to find a suitable business for a commercial property than a tenant for a residential property. It can also be more challenging to sell, making it overall a higher-risk strategy.
Demand can also plummet depending on external factors. For example, the rise of remote working due to the global pandemic had a knock-on effect on the office-letting sector. Generally, it is also much more expensive to acquire a commercial property due to its large size.
For these reasons, residential buy-to-let remains the most common type of investment property.
In terms of the government’s plans for EPC rating regulations, residential landlords have more certainty than commercial ones.
Laws surrounding the energy efficiency of rental buildings will likely become more stringent for both sectors in the future due to the government’s commitment to net zero by 2050.