Before we get into the detail, let\u2019s have a brief recap.<\/p>\n
The \u2018Retrofit Revolution\u2019 refers to the national need to retrofit the majority of existing homes and commercial buildings to EPC B by 2050.<\/p>\n
In London, Deloitte estimates that approximately 15 million sqft of office space will need to be upgraded\/retrofitted by 2030. That\u2019s 80% of all London office space.<\/p>\n
C-Link\u2019s data<\/a> suggests that the average cost of a heavy office refurb is circa \u00a3140sqft to \u00a3180\/sqft.<\/p>\n This would place the value of the ensuing office upgrade work between \u00a32.1Bn and \u00a32.7Bn (or up to \u00a3385 million per year between 2023 and 2030). The good news for construction professionals is that these building owners must conduct these works or their buildings cannot be leased legally. From April 2023 it will be unlawful to let or continue to let a commercial property with an EPC rating of F or G.<\/a><\/p>\n It\u2019s a big challenge and a big opportunity.<\/p>\n \u2018Commercial\/ Institutional Retrofit\u2019 means upgrading the energy efficiency of a building that is used for commercial or institutional purposes (Universities, office buildings etc). This can be achieved by doing one or a combination of the following things:<\/p>\n Office building owners have 3 key priorities when it comes to Commercial Retrofit.<\/p>\n Legal Lease-ability:<\/strong>\u00a0Top of mind for commercial building owners is the quickly approaching change to leasing legislation.\u00a0From April 2023 it will be\u00a0unlawful to let or continue\u00a0<\/strong>to let a commercial property with an EPC rating of F or G<\/a>. By 2030 (7 years time) all non-domestic buildings must have an EPC rating of A or B.<\/p>\n To give an idea of the scale of the opportunity. Savills estimates that approximately 87% of the UK\u2019s offices have an EPC of C or below<\/a>.<\/p>\n In London, Deloitte estimates that approximately 15 million sqft<\/a> of space will need to be upgraded\/retrofitted by 2030. That\u2019s 80% of London\u2019s office space.<\/p>\n This means that owners of low EPC commercial buildings must either sell (into a challenging real estate market) or invest money in retrofits in a bid to retain, or increase building value.<\/p>\n They really don\u2019t have another choice.<\/p>\n This pressure represents a massive opportunity for larger contractors and subcontractors. It will almost certainly lead to more work than current Tier 1 contractors can manage.<\/p>\n Commercial Lease-ability: <\/strong>Beyond legal leasing, office building owners must also keep up with their tenant’s interests. And for the last few years, office building tenants have shown a growing and strong bias towards energy-efficient buildings. This preference is so strong that tenants and their young teams are starting to exchange new, glassy, towers for trendy retrofitted warehouses or retrofitted buildings with character and attractive sustainability credentials.<\/p>\n What this means is that office building owners who do not immediately need to retrofit their buildings may still be losing out on top-quartile rents and exciting tenants because their buildings are energy inefficient.<\/p>\n For the tenants, this isn\u2019t just about values or attracting talent. The UK commercial energy price cap expires in May. This will leave many businesses facing increases in energy costs as high as 350%<\/a>. Leasing an energy-efficient building saves businesses money.<\/p>\n Sale-ability and Value:<\/strong> As mentioned above. Office building owners with EPCs below B only have 2 choices, to retrofit their assets or to sell.<\/p>\n If a disposal\/sale is made without a retrofit. The original owner would have to accept a discounted price because the EPC liability will fall to the new owner.<\/p>\n If they want to sell for a good price, they will need to commission a deep retrofit which will add more value than it costs. Anything less will feel like a painful loss. The new owner may opt to demolish the building and start again. In this case, a large demolition and construction contract will be tendered. Although, as material and capital costs continue to inflate, this option looks less and less attractive. Not least because lenders prefer buildings as collateral, rather than building sites.<\/p>\n Institutional building owners (Universities, Hospitals, Government etc) have 3 key priorities when it comes to Institutional Retrofit.<\/p>\n Energy Costs: <\/strong>As mentioned above. For building operators, energy efficiency equals lower bills. Because Institutional building owners can own and operate their buildings for decades, they can often afford (from an investment perspective) a longer payback period. In this way, they are much more like the domestic homeowners described in our\u00a0last blog.<\/p>\n Many institutions have serious energy cost challenges. 44% of councils<\/a> have warned they will be unable to pay their energy bills unless they retrofit their buildings to make them more energy efficient.<\/p>\n The challenge to working with these kinds of building owners is they often have very long and arduous decision-making processes. And these processes can become more fraught when it comes to \u2018signing off\u2019 expensive and potentially disruptive projects, like a whole building retrofit.<\/p>\n Brand Values: <\/strong>Many institutions have adopted sustainability pledges. Either because of their convictions or to attract their target market\/clients (students etc).<\/p>\n As a result, many have realised that the \u2018elephant in the building\u2019 is often their own real estate portfolio and its energy efficiency. According to the Princeton Review, US Higher-education institutions boast 3,850 LEED<\/a> (Leadership in Energy and Environmental Design) certified buildings, more than any other industry.<\/p>\n Research from Shakespeare Martineau revealed that\u00a079% of students were attracted to Universities with clear sustainability plans<\/a>. And\u00a090%<\/a>\u00a0of prospective students said they would be \u2018proud\u2019\u00a0to study on a \u2018green campus\u2019.<\/p>\n Regulation:<\/strong>\u00a0Beyond energy costs and brand values. Institutions must also contend with new regulatory requirements.<\/p>\n It is not guaranteed but there is a high likelihood that the UK (like many other G7 nations) will introduce some form of a carbon tax. To enable accurate taxing\/monitoring of companies and institutions they will need to be able to prove and quantify how much carbon they emit during the course of their operation.<\/p>\n The emission-generating business activities are split into\u00a03 categories (or scopes)<\/a>.<\/p>\n Briefly:<\/p>\n There are 3 ways contractors and subcontractors can win commercial and institutional retrofit work.<\/p>\n Conversely, subcontractors should use their relationships with building owners to understand what their retrofit plans and either offer to introduce them to trusted larger contractors or offer to join the team of the appointed contractor to serve as a \u2018quality control\u2019 \/ \u2018inside man\u2019 for the building owner.<\/p>\n Building owners of this scale are generally more sophisticated than domestic owners and are aware of the need to decarbonise and retrofit their assets.<\/p>\n However, they rarely understand how to initiate or execute a projects of this size safely and cost-effectively. This is where Contractors and Subcontractors can take the initiative and offer free consultation advice.<\/p>\n After April 2023, reaching out to building owners about \u2018green retrofit services\u2019 will be like \u2018pushing on an open door\u2019.<\/p>\n C-Link<\/a> is working with leading construction businesses that are taking advantage of this once-in-a-generation opportunity.<\/p>\n If you\u2019d like to discuss how C-Link<\/a> can help you do the same drop us a note here<\/a>.<\/p>\n If you\u2019re not ready but if you\u2019re intrigued, why not check out our platform<\/a>?<\/p>\n <\/p>\n Photo by Nastuh Abootalebi<\/a> on Unsplash<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" PART 3 OF 4: HOW TO PROFIT FROM THE \u2018COMMERCIAL \/ INSTITUTIONAL RETROFIT\u2019 OPPORTUNITY. Before we get into the detail, let\u2019s have a brief recap. WHAT IS THE RETROFIT REVOLUTION? […]<\/p>\n","protected":false},"author":28,"featured_media":17708,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-17703","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog"],"acf":[],"yoast_head":"\nWHAT IS COMMERCIAL\/INSTITUTIONAL (LARGE BUILDING) RETROFIT?<\/h4>\n
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HOW DO THE PRIORITIES OF OFFICE BUILDING OWNERS DIFFER FROM INSTITUTIONS?<\/h4>\n
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\nIf sold at a discount the market and legal context remain unchanged.<\/p>\nHOW DO THE PRIORITIES OF INSTITUTIONAL BUILDING OWNERS DIFFER FROM COMMERCIAL BUILDING OWNERS?<\/h4>\n
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HOW CAN CONTRACTORS PROFIT FROM COMMERCIAL \/ INSTITUTIONAL RETROFIT?<\/h4>\n
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ARTICULATING THE GREEN PREMIUM TO COMMERCIAL \/ INSTITUTIONAL BUILDING OWNERS?<\/h4>\n
WHO IS TAKING ADVANTAGE OF THE RETROFIT REVOLUTION?<\/h4>\n