UK: British property investors have increased budgets for environmental sustainability improvements by an average of 20 per cent year-on-year due to tenant demand, according to a new survey.
The research from Handelsbanken, which surveyed 200 property investors across the country, found that both business and domestic tenants alike are demanding lower-carbon buildings. There was a fairly even split between real estate investors and property managers, and between commercial and domestic properties.
More than nine in ten (92 per cent) of those polled said that multiple tenants have asked for information on interventions that can cut emissions, such as heat pumps, onsite solar panels and electric vehicle (EV) charging points. Demand for these technologies was found to be highest in north-east England and north-west England.
Additionally, three in five said most of their tenants are only seeking properties with an Energy Performance Certificate (EPC) rating of C or higher. Energy efficiency is a more pressing concern for tenants in London. Handelsbanken says that this is because they are seeking to keep their costs low, with the capital more acutely affected by rising bills.
Handelsbanken found that most investors are now factoring in energy efficiency and onsite low-carbon technologies to a greater extent when deciding whether to develop or acquire properties.
There is currently a requirement in England for all commercial and residential properties to be rated EPC E or higher before they are placed on the rental market. Plans were in place to raise the minimum threshold to EPC C in 2028 for residential rentals, but prime minister Rishi Sunak scrapped this last September.
The Handelsbanken survey found that most landlords would be in favour of the 2028 target being reinstated. Furthermore, three-quarters would support a longer-term target to raise the minimum EPC rating to A for commercial and residential lettings – the highest level achievable.
Handelsbanken’s UK head of sustainability Richard Winder said: “Property investors are clearly recognising the long-term value of maximising energy efficiency across their portfolios, and are eager to meet the highest sustainability standards to capitalise on the commercial benefits. Locking in value, reducing operating costs, and attracting and retaining tenants are all front of mind for investors.”
