OFFICES & ENERGY LABELS
by Hans van Brakel, Project Manager
On 5 April 2017, the Financial Daily paid attention to the obligation for offices to have at least an Energy Label C from 2023 onwards, ‘otherwise the offices may not be used’. According to the FD, banks are putting money aside to encourage real estate owners to make their offices more sustainable. In the article various numbers are mentioned left and right.
The FD refers to an unspecified study by Maastricht University in which it is stated that rents for green buildings are approximately 10% higher than those for non-sustainable buildings. The article also mentions that a green building is worth an average of more than €106 per sqm., the cost of obtaining label C would be €57 per sqm. More than half of the offices do not yet have label C. Minister Blok expects a total investment volume of 860 million, while renovation experts expect 2 billion for the greening towards C. Impressive figures.
But how difficult is it technically to obtain an energy label C? According to a news item of 28-11-2016 on the website of the Dutch government, it is not that bad: *Offices with a D, E or F label can be modified to achieve label C without any structural changes. Modifications to installations (e.g. lighting) are already sufficient. Only offices that now have label G need measures such as glass or roof insulation”*
We agree. Our experience, gained from managing renovation projects, due diligence advice and certifying existing real estate, endorses that upgrading to a C-label does not require too many technical interventions.
But suppose, you want a higher label for your property than C. What interventions should you take ? And how far-reaching are they?
We give an example from our experience as a Project Manager. It concerns an office complex of approx. 17 thousand sqm. in the centrale area of The Netherlands, built in 1992 and after the departure of an anchor tenant only 10% of it is still let, in an already difficult region. Commissioned by the owner, a mid-term renovation has been carried out between 2012-2015 to bring the project into line with the contemporary tenants’ wishes in terms of appearance and comfort. Preconditions were for example a pleasant indoor climate with increased cooling capacity and an upgrade to Energy Label A.
This was achieved by applying the following interventions:
- The replacement of technically written-off boilers by modern energy-efficient boilers.
- The same for the depreciated air handling units.
- Most of the year heating and cooling is provided by energy efficient heat pump systems instead of gas.
- The replacement of obsolete lighting fixtures by energy-efficient fixtures, in combination with daylight-dependent switching and motion sensors.
Structural interventions on the roofs and facades were not necessary for this building and for the proposed measures to achieve Energy Label A. Immediately, the A-label was a good opportunity for our client to include sustainability measures in the renovation package that made a BREEAM-in-Use Very Good certificate feasible. A few examples of BREEAM measures (in addition to the A-energy label):
- water-saving plumbing.
- indoor sun protection that meets the BREEAM requirements.
- a lighting level of at least 500 Lux.
The key question, of course, is what these measures cost. We must take into account the impact of costs that must in any case be incurred by replacing old components with equivalent components, the so-called ‘like-for-like exchange’. After correction of these costs on the label measures, we ended with A-label related costs of approximately 1.2% of the investment costs for this specific project. For additional BREEAM measures, the costs were approx. 0.65% of the investment costs. OK, they are extra costs, but they have resulted in an office that meets the current requirements of many tenants. Thanks to a good design and the ability to invest in advance, the building is now fully let again with long-term leases. A great achievement.
In the example above, the costs for the A-label were included in the renovation costs in one go. For objects for which no renovation is planned in the short term, we recommend including the measures at logical replacement points in a long-term maintenance plan. For a mandatory upgrade to a C-label, you have until 2023, for an upgrade to an A-label until 2030. This leaves sufficient time for almost every building to meet the requirements within the statutory time-frame without additional investments.
Finally: a C-label -and higher- contributes to better rentability, but is not the critical success factor. Rental conditions, appearance of the property, good indoor climate, attractiveness of the location and good accessibility are often leading factors in the choice of a tenant.
Please feel free to contact me if you would like to discuss the consequences of these label obligations for your property.