Industrial and logistics spaces are facing a critical threat, with up to 85% of facilities potentially becoming unlettable by 2030.
- The new Energy Performance Certificate (EPC) regulations are set to impose stricter standards on properties, requiring a minimum rating of B by 2030.
- Almost half of the existing small to mid-box spaces currently fail to meet the forthcoming EPC standards, highlighting a significant challenge for the sector.
- Despite rising demand for industrial and logistics spaces, the supply remains insufficient, exacerbating the situation as new regulations loom.
- The industry is calling for immediate action and governmental support to address these challenges and avoid a detrimental impact on businesses.
Industrial and logistics spaces are on the brink of a significant transformation due to upcoming updates to Energy Performance Certificate (EPC) regulations. According to the report titled ‘Big Things in Small Boxes 2024,’ released by property company Potter Space along with Savills, nearly 85% of small to mid-box spaces could become unlettable by 2030 if they do not comply with the new standards. These regulations dictate that by 2027, facilities must achieve at least a C rating, escalating to a B rating requirement by 2030.
The current landscape reveals that 47% of these facilities already fall short of the 2027 C rating. This presents a looming issue, as businesses have historically struggled to secure adequate warehouse space, affecting their growth and expansion capabilities. Supply has consistently lagged behind demand, suppressing it by an estimated 38% across the nation. The imposition of stricter energy regulations is anticipated to intensify these difficulties, further constraining available real estate options for businesses in need.
Jason Rockett, Managing Director of Potter Space, expressed concerns about the fading focus on Net Zero and the impending EPC guidelines. He emphasised the nearness of 2027 in property terms and stressed the necessity of immediate measures. The industry, he suggested, needs a practical roadmap supported by government initiatives and funding to mitigate potential economic impacts. Rockett advocates for an integrated planning approach to allow for the development of various warehouse types, ensuring businesses have the necessary infrastructure to operate effectively.
Retrofitting has been proposed as one avenue to meet EPC requirements, yet it comes with its challenges. It is not only expensive but also necessitates relocating tenants, some of whom might find themselves without alternative premises. Furthermore, certain warehouses might be structurally unsuitable for renovation. Steps such as removing heating systems may improve energy ratings but could negatively affect the usefulness of these spaces. Jenna Strover from Potter Space highlights the potential of solar panels, noting that fully utilising available roof space for photovoltaic (PV) installations could significantly benefit energy supply, powering an estimated 4.3 million homes. This approach aligns with the broader objective of crafting sustainable, future-oriented spaces for industry.
Clare Bottle from the UK Warehousing Association (UKWA) underscores the sector’s diverse clientele, from SMEs to larger organisations. The potential loss of existing stock due to non-compliance with MEES standards presents a formidable hurdle. Bottle advises landlords to reassess EPC ratings of their properties considering recent methodological updates. Simple upgrades, like transitioning to LED lighting or installing solar panels, could align properties with the new standards, reducing the need for extensive retrofitting.
The challenge faced by the industrial and logistics sector is profound, demanding swift and comprehensive action to ensure sustainability and continued business growth.
