Summary

• Property accounts for almost half of total UK carbon emissions, and commercial buildings alone represents 20% of the total. The government's recent implementation of the EU's Energy Performance of Buildings Directive (EPBD) in the form of energy efficiency certification, as well as ongoing revisions to Part L of Building Regulations (the next being due in 2010), form vital steps towards cutting carbon emissions
  
  
• Energy efficiency certification - which is mandatory – comes into effect on 6th April 2008, but will not effect all buildings immediately. Certification will consist of two elements: an Energy Performance Certificate (an asset rating) and a Display Energy Certificate (an operational rating representing its in-use energy performance). All commercial buildings will eventually be affected by certification and it will provide significant performance benchmarking and transparency, adding further pressure on raising building standards.



• Aside from legislation, the key driver of energy efficiency in buildings - particularly offices - is occupier demand. This is increasingly influenced by corporate social responsibility (CSR). Prior to the arrival of energy efficiency certification, the BRE Environmental Assessment Method (BREEAM) represents the principal benchmark for investors, developers and occupiers looking to assess and make known the green credentials of a commercial building.
  
  
• Rising energy costs are seen by some as an important driver of corporate tenant demand but, in reality, they represent a tiny part of operating costs, typically 1%. Yet, cost does play a part in demand for green buildings, particularly if issues such as staff productivity and whole of life costs are considered.
  
  
• As energy efficiency becomes more valued, it will result in shorter void periods for energy efficient buildings and a rental differential between higher-rated and lower-rated buildings. Unless they are upgraded, poorly-rated buildings will experience rapid obsolescence
  
  
• Although a suitable valuation methodology for assessing green buildings has yet to be agreed upon, green buildings should experience reduced obsolescence and keener yields than buildings that are less green. The ongoing tightening of building regulations, as well as other legislation and financial incentives such as the possible introduction of green business rates will continue to drive change in the supply and demand of green commercial buildings.