I was reminded by a recent Savills podcast that it is expected that 80% of the buildings that will exist in 2050 have already been built. I also learnt (as noted by Basil Demeroutis, Managing Partner at Fore Partnership) that new builds are only on average 5% more energy efficient than a well carried out retrofit, but use three times more embodied carbon during their construction.
It seems, therefore, that more emphasis is needed on retrofitting existing buildings. But this will come at a cost to landlords. With proposals before parliament to raise the minimum EPC rating for the letting of commercial buildings to a C rating by 2027 and a B rating by 2030, smaller landlords in particular may already find that the cost of necessary works to achieve these standards outweigh the rents receivable. And this is without the additional burden of retrofitting their assets to achieve energy efficiency outcomes similar to those of newbuilds.
Retrofitting projects do not benefit from the same VAT exemptions that newbuilds do and the recent announcement by Chancellor Rishi Sunak that VAT will not be payable on the installation of energy efficiency measures applies only to homeowners. As such, Nadeem Khan (director in the Savills Engineering and Design Consultancy team) in the Savills podcast calls for greater incentives for commercial landlords to retrofit their buildings in an energy efficient manner. In my opinion, this cannot come too soon. Building works do not happen overnight and landlords will need to gain the co-operation of, or work around, their tenants. The government's target to reach net-zero by 2050 might seem a way off but incentives and measures need to be put in place now if this target is to be achieved.