Energy Performance Certificates (EPC) are commonplace in the UK real estate market, with an increasing importance being placed on energy efficiency. As a result of this, it is vital that developers consider the impact of EPC ratings on the success of their development.
What is an Energy Performance Certificate (EPC) Rating:
An Energy Performance Certificate is a rating scheme that indicates the energy efficiency of a building. It is a widely accepted metric and is used across property types in the UK. In order to obtain an EPC rating, property owners will need to subject their property to an inspection by a Certified Energy Assessor. In this inspection the assessor will evaluate the property’s energy efficiency. In order to do this, the assessor will evaluate the following:
Heating systems: This includes boilers, radiators and heaters.
Insulation: This will range from insulation in the walls to whether the windows are double or triple glazed.
Lighting: The assessor will measure the energy efficiency of the building’s lighting systems, including the use of LED bulbs.
Renewable Energy: The use of renewable energy sources will have a favourable impact on a building’s EPC rating.
Once the inspection has been conducted the assessor will draft a report which details the building’s EPC rating and how it was calculated. Moreover, the assessor will also include a set of recommendations on how to improve the building’s energy efficiency. Once issued, the EPC rating will be valid for a 10 year period, after which it will need to be renewed. The EPC rating can range from A to G. An “A” rating is the highest rating and indicates that the building is equipped with the best possible energy saving systems. In contrast, a “G” rating is the lowest rating, and indicates that the property still requires extensive improvements in order to become more energy efficient.
Benefits of a High EPC Rating:
Achieving a high EPC rating can offer significant benefits to both the owners and the users of the building:
Increased Energy Efficiency:
While this may appear as an obvious benefit it can have significant impacts on the success of a property development project. By improving the energy efficiency of a building, a developer can achieve a number of different benefits. Firstly, there are a number of incentives provided by governments and lending institutions in order to encourage improved energy efficiency. For example, some lenders will offer a decreased interest rate on loans used for the development of “green” buildings. This can reduce the financing cost for the developer and contribute to a more successful project. In addition to this, the government may provide certain tax incentives to “green” developments, enabling the developer to reduce their tax spend and improve the profitability of their project. Secondly, developers of energy efficient buildings are able to reduce their carbon footprint by decreasing their energy consumption. This is an important factor to consider for developers who prioritise environmental sustainability.
Lower Vacancies and Higher Rentals:
Another benefit of achieving a higher EPC rating is decreased vacancy rates and higher rentals. Many potential tenants are attracted by higher EPC ratings. For example, companies with their own ESG goals may be required to rent space with a higher EPC rating. As a result, there is a higher demand for space with a higher EPC rating, contributing to lower vacancies among highly rated buildings. Moreover, many tenants are willing to pay a premium for high EPC rated properties as a result of their decreased energy bills. This can drive the rental prices up and have a positive effect on the overall value of the building.
Lower Operating Costs:
As a result of increased energy efficiency, property developers are able to reduce their operating costs and improve the overall profitability of their development. Measures such as the installation of LED light bulbs can use up to 70% less energy than incandescent bulbs. In addition to this, LED bulbs can last for 25 times as long as incandescent bulbs. As you can see, measures such as this can greatly reduce operating costs over the life of a building. Another example would be the installation of grey water systems, in which recycled water is used for non-potable uses, reducing the building’s water bills.
As you can see there are a number of different benefits that can be realised by achieving a higher EPC rating. As a result of this it is vital that property developers consider energy efficiency when planning their developments. By increasing the energy efficiency of your development you will not only increase the long term profitability but also decrease your carbon emissions. Furthermore, through the assistance of a skilled independent mortgage broker, developers can access discounted financing as a result of their higher EPC rating.