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Green Energy and the impact on commercial developments

Published: 1 April 2021 - Rachael Morling

Laurence Lacey, partner in the commercial property team at national law firm Clarke Willmott LLP, shares his thoughts on the implications for new commercial developments and re-purposing of existing buildings and estates following the publication of the Energy White Paper.

The term “green development” has been around for several decades. Green development considers the social and environmental impact of either a new or re-purposing of an existing development through the lens of three guiding pillars. Firstly, does the development address the values of community taking into consideration cultural sensitivities. Secondly, what environmental impact will the development have in protecting or damaging the ecosystem the development resides. Thirdly, what resources are being used in terms of energy usage and carbon neutrality.
 
With this in mind I was interested to see how the Energy White Paper would support and positively impact the drive for greener developments. Some commentators have described the Paper as the biggest announcement in the energy sector since the Electricity Act of 1989 and if you look at how energy was generated then compared to now, the marketplace has totally been turned on its head with green energy generation now dominating.
 
The paper articulates how it will transform energy, support a green recovery from Covid-19 and create a fairer deal for consumers with specific actions to support objectives. We should not underestimate the long-term impact of Covid-19 on the commercial property sector. In many respects the Paper forms part of a larger agenda including the 10 Point Green Industrial Plan and National Infrastructure Strategy, all of which supports the acceleration of greener developments, not just new build, also retrofit or repurposing.
 
Over recent months, due to Covid-19 and the acceleration of on-line businesses towns and cities across the UK are undergoing significant change with swathes of retail estate becoming empty and surplus to requirement.
 
You just have to look at the growing list of retailers going into administration in 2020 including Arcadia Group (444 stores), Debenhams (124), Jager (423), Harveys (105), Brighthouse (240) just to name but a few, to see the impact this will have. In addition, many office-based businesses are reviewing the way they work with increasing numbers stating they will not need the amount of space they currently have.  
 
With this backdrop this creates a challenge and opportunity for developers, landlords and investors alike of existing commercial properties. Yes, there will be a disruption in revenue, but it also gives an opening to undertake work on these buildings to become carbon neutral.
 
There is a view that I share that if a building is not carbon neutral within the next 15 or maybe 10 years’ time, they could be stranded assets with significantly reduced financial value. With 80% of existing buildings going to be around in 2050 according to the Green Building Council urgent action is needed. With empty offices and retail outlets, developers and landlords have an opportunity to engage and work with prospective tenants who are increasingly looking at their own carbon footprint to ensure the place they work form is not just fit for purpose, aesthetically pleasing but is net zero.
 
When looking at new commercial developments, the direction of Government travel is clear with the commitment to make homes, hospitals and workplaces more energy efficient. The ramping up of installation of heat pumps from 30,000 per year to 600,000 per year by 2028; the requirement that all non-domestic properties to be EPC Band B by 2030; and the opportunities of hydrogen being introduced in the gas network amongst other measures mean developers will need to fully embrace the “Green Development Revolution” which had already started before the Energy White Paper. Even today new developments whether office, industrial or warehousing which are in progress are not as energy efficient or forward thinking as they could be, potentially placing the landlord in a difficult situation in a relatively short time frame.
 


 
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