New Eco-Rules Could Render Industrial Spaces Unlettable by 2030

New research highlights that up to 85% of small-to-mid-box industrial and logistics (I&L) spaces could become unlettable under the Minimum Energy Efficiency Standards (MEES) set to take effect by 2030.

This impending crisis could disrupt an already supply-constrained market, stifling growth for many businesses reliant on these spaces.

Key Findings:

  1. Rising Demand vs. Lagging Supply:
    Demand for small-to-mid-box industrial spaces continues to grow.
    However, 38% of demand is being suppressed due to a lack of available, compliant stock.
  2. Implications of MEES Regulations:
    By 2027, all properties must have an EPC rating of C or higher to be let, affecting 47% of current stock.
    By 2030, properties will need an EPC rating of B or higher, leaving 85% of spaces potentially unlettable.
  3. Economic and Environmental Impact:
    These spaces are critical for SMEs and larger organizations with extensive distribution networks.
    Failure to upgrade facilities risks creating a bottleneck that could stifle economic activity and growth.

Challenges with Retrofitting:

  1. Cost: Upgrading to meet new EPC requirements can be prohibitively expensive for many landlords.
  2. Tenant Displacement: Retrofitting often requires relocating tenants, which may not always be feasible.
  3. Facility Limitations: Some buildings are too old or poorly maintained to justify extensive retrofitting efforts.
  4. Heating System Removals: Removing heating to improve EPC scores could compromise the usability of spaces.

Potential Solutions:

  1. Government Intervention:
    • Funding: Provide grants or subsidies to assist property owners in retrofitting buildings.
    • Roadmap: Develop a clear timeline and guidelines for compliance to reduce uncertainty.
  2. Innovative Upgrades:
    • Solar Panels: Utilizing roof space for photovoltaic (PV) panels could generate enough energy to power 4.3 million homes.
    • LED Lighting: Simple upgrades like LED lighting could significantly improve energy efficiency with minimal disruption.
    • Holistic Sustainability: Consider environmental measures beyond EPC compliance, such as renewable energy integration.
  3. Proactive Reassessment:
    • Reassess EPC ratings using updated methodologies to ensure accuracy.
    • Some buildings may already meet requirements or need only minor adjustments.

Industry Response:

Jason Rockett, MD, Potter Space:
Supports EPC regulations but calls for extended timelines and government support to ensure compliance is achievable without disrupting businesses.

Clare Bottle, UK Warehousing Association:
Advises landlords to reassess their EPC ratings and explore upgrades such as LED lighting or rooftop solar to achieve compliance.

Jenna Strover, Potter Space:
Advocates for a holistic approach to sustainability, emphasizing innovation and long-term solutions.

Conclusion:

The MEES regulations represent an opportunity to improve sustainability across the industrial and logistics sector. However, without proactive measures, the new rules risk creating a significant supply gap that could hinder business growth. A coordinated approach involving landlords, tenants, and government support is essential to ensure a future-ready, eco-compliant property market.