A development platform focused on delivering best-in-class net zero carbon office space in central London.
To acquire and retrofit existing environmentally poor office buildings, converting them into best in class net zero carbon product
Strategy
Environmental Improvements and Non-Compliant EPC Buildings
Targeting
Management team with combined 70yr + track record delivering superior returns to investment partners
Track Record
Buildings account for 78% of emissions in London
A Typical Zero Carbon Building
Nabers 4.5
Green electric building
EPC ‘A’ rating
Targeting ‘Excellent’ rating
WELL GOLD
Cyber Essential accreditation and GDPR compliant
Targeting ‘Excellent’ rating
Best-in-class ‘green buildings’ will achieve maximum pricing, tenant interest and maximum rents
By 2030, all office buildings in the UK need to have a minimum EPC rating of B to be legally lettable
impact
There are currently 50,000 office buildings in London, of which it is estimated that by 2030 only 10% of these will be compliant with the minimum EPC rating of B.
There will be many obsolete office buildings which can not legally be let unless they are retrofitted and this comes with expense, and a special skill set to deliver.
Further, completing the necessary works to achieving the standard may cause tensions between occupiers and landlords as the tenant is unlikely to want to sacrifice their access for works to take place. Temporary exemptions are stipulated in the legislation to help navigate these challenges, but we are likely to see landlords being obliged to take advantage of lease events to ensure changes are enacted as soon as possible in order to avoid breaching requirements.
Some landlords may attempt to gain rolling five-year exemptions based on technicalities, but we expect the government to make this increasingly onerous and costly, notwithstanding the reputational risk this could exert on the building owner or operator.
This widespread risk of obsolescence will help contribute to liquidity in the market as investor/ developers look to leverage this risk to acquire discounted stock for retrofit or redevelopment.
This will create a two tier market. Best in class ‘green buildings’ will achieve maximum pricing, tenant interest and maximum rents.
RICS have updated their valuation methodology and have asked valuers to take EPC into account when valuing buildings.
CONTACT
Location
Target PURCHASE PRICE
GREEN STRATEGY
Counter cyclical approach, acquiring office assets in Central London, retrofitting and repositioning assets to deliver best in class green buildings.
Zero Carbon Space is a thematic branded platform, funded by investment partners alongside management, focused on developing best in class zero carbon office buildings in central London.
BACKGROUND
In April 2022 the International Panel on Climate Change (IPCC) released its latest assessment report, which reveals that emissions are at the highest level in human history. Emissions rose 12% in 2019 when compared with 2010 and were 54% higher than in 1990. The report stresses that the threats to human wellbeing and planetary health are “unequivocal.” It urges expedient action, as the window to prevent global temperatures from rising by more than 1.5°C above the pre-industrial average rapidly closes. Global GHG emissions need to peak before 2025 and be reduced by 43% by the end of this decade to stay under that threshold.
Buildings are estimated (by the WorldGBC) to account for 40% of global carbon emissions, but in our cities this proportion is typically considerably higher. Based on audits across 32 global cities, the contribution of buildings to citywide carbon emissions has a median value of 60%. In the largest global business centers the contribution of buildings is even higher. For example, and according to their own government estimates, buildings account for 78% of emissions in London.
As a result of the UK government’s 2050 net zero goals, changes in government policy and building regulations will put significant pressure on owners of real estate to improve the sustainability of their buildings. Legislation introduced in 2018 set a minimum energy efficiency standard (MEES) for non-domestic buildings to achieve a set level of energy efficiency. Benchmarked through EPCs (energy performance certificates), the legislation requires properties to hold an EPC grade of E or above in order to be let or sold. In 2023, the grade E requirement was extended to all non-domestic properties including those under lease, unless a valid MEES exemption has been registered. By 2030, all office buildings in the UK need to have a minimum EPC rating of B to be legally lettable. Some debate exists about the enforcement of Central government on this requirement but the government’s direction of statutory requirements is clear and is aligned with the requirements of tenants and investors.