July 25, 2023
A new report, by national property consultancy Carter Jonas: “Offices: Past, Present, Future – the Sustainability of Office Stock”, illustrates the volume of UK office stock that, without investment, is unlikely to be fit for purpose in terms of meeting the needs of occupiers and complying with MEES legislation.
The research analyses how sustainable and energy efficient the UK’s office stock is, and to what extent it meets the requirements of the workforce of the future and today.
Scott Harkness, Head of Commercial, Carter Jonas, said:
“Our research highlights the challenges facing many commercial property owners, particularly of older or low-quality space. This is not to say that ageing and unsustainable stock doesn’t have a role in meeting occupier demand. Repurposing older office space can help reduce the need for new construction and promote sustainable urban development, particularly when considering factors such as the embodied carbon contained in existing buildings and the environmental benefits of reusing existing structures. But, moving forward, much of its relevance will be defined by how proactive landlords and developers are in responding to legislation and the requirements of the modern workforce.”
Using 110,000 office records, Carter Jonas analysed four key office quality metrics: EPC ratings, BREEAM assessment, office-grade classification, and age of office stock, looking at the picture both nationally and in 12 major UK office markets.
Approximately 55% of existing office inventory in the UK by floorspace is more than 30 years old, and nearly a quarter was originally constructed before 1950. However, this is not necessarily negative, as refurbishing older buildings can be more of a sustainable solution than demolishing and rebuilding.
62% of London’s office stock is at least 30 years old, above the UK average. Of the key regional cities analysed, Birmingham, Liverpool and Bristol have the largest amount of stock over 30 years old, at over 65%. Cambridge has the lowest proportion of stock over 30 years old at just 41%.
Carter Jonas classified the UK’s office buildings into classes 1-3, with class 1 being the highest quality offices and class 3 being the poorest. These are used to differentiate buildings by quality, based on key factors such as location, age, building quality, amenities, and rental value.
Class 1 space accounts for 28% of the total UK stock and is where most of the occupier demand is now focussed. As a result, nearly three-quarters of the UK’s stock is not sufficiently high quality to attract a broad range of occupiers.
Class 3 space – of the poorest quality – accounts for a fifth of the total UK office stock and is seen as unlettable to most occupiers.
Across the 12 cities analysed, Oxford, Cardiff and Edinburgh have the largest volume of low-quality office space (class 3) as a percentage of the total office stock, at 28%, 20% and 19%, respectively (Edinburgh also has a higher number of listed buildings than others).
Analysis of the share of class 1 office stock by floorspace across the 12 cities found London standing out with 70% of its office stock being of the highest quality. Manchester and Birmingham have the second and the third highest quality share with 36% and 35%, respectively.
Office properties within EPC bands F and G account for 17.2% of all offices in Great Britain, meaning that nearly a fifth of all office buildings potentially became unlettable from 1st April 2023, unless remedial action has been taken. In reality, the figure will be lower than this as exemptions will apply to some properties, some space may be in the process of being upgraded and re-assessed, and some may be vacant and awaiting a change of use.
Given the proposed tightening of the MEES regulation, a substantial proportion of office buildings will be unlettable by 2027 if upgrades are not carried out. Only 31.6% of GB’s stock is band C or better, the minimum proposed MEES standard by 2027. A mere 8.3% of the stock would satisfy the proposed minimum MEES requirement of EPC band B from 2030.
There is a notable difference between the 12 locations analysed. Cities including Glasgow, Edinburgh, Birmingham and Bristol could find that 70% of their stock will be unlettable by 2027 without capital investment, with this share of properties below the minimum standard potentially increasing to 90% and above in 2030.
Cardiff and Manchester have the highest number of offices in bands C to A, with 40% and 38%, respectively. In contrast, Glasgow and Edinburgh have the highest number of offices in bands G to D, followed by Bristol and Birmingham.
London has the most BREEAM-rated office buildings in the UK, accounting for around 60% of the total. However, in the capital only 32.7% of BREEAM-rated buildings are rated as Excellent or Outstanding, ranking it eighth of the 12 cities. The top three cities on this measure are Cambridge (51.9%), Bristol (46.7%) and Cardiff (46.5%).
Carter Jonas has developed its Office Market Sustainability Index, comparing the average sustainability level of the office stock across the 12 UK office markets, to create an overall ranking. The findings conclude that London is at the forefront of sustainability initiatives and regulations, and it is ranked first among the 12 cities. The capital has implemented several measures to promote office sustainability, including environmental regulations, building codes, and initiatives to reduce carbon emissions and promote sustainable practices. Leeds and Manchester came second and third respectively. Both cities share similar characteristics including a younger office stock with a high proportion of EPC bands A and B.
Mr Harkness added: “Occupiers are demanding office space that meets increasingly high sustainability criteria. This is partly being driven by MEES, but additionally, in the current competitive labour market, providing a vibrant, attractive, and sustainable work environment is vital for the recruitment and retention of talent, encouraging working from the office, and promoting the well-being of employees; however, our findings highlight significant variations in quality and sustainability characteristics among the key UK office markets.
The overall disparity between the cities suggests there may be opportunities for targeted strategies in sustainability and energy efficiency in these markets, involving local authorities, landlords, and investors. A key question will be the extent to which market forces alone will drive this transformation without the need for further government intervention.”
Key take aways:
- 12 – the key UK office markets were analysed: Birmingham, Bristol, Cambridge, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, London, Manchester, Newcastle and Oxford
- 17% – of the GB’s stock now sits in EPC rating bands F and G. Only 31.6% of stock is band C or better, which is where occupier demand is principally focussed.
- 8.3% of the stock would satisfy the proposed MEES requirements from 2030
- 28% – of the UK’s stock is high-quality Class 1. Class 3 space accounts for nearly 20% of the total UK office stock and is likely to be unlettable to the overwhelming majority of occupiers
- 55% – over half of existing UK office inventory by floorspace is more than 30 years old, and nearly a quarter was built before 1950
- 11% – the total floorspace constructed since 2010 so should meet relatively high sustainability standards
- 62% – percentage of London’s office stock is at least 30 years old, above the UK average. Of the key regional cities analysed, Birmingham, Liverpool, and Bristol have the largest amount of stock over 30 years old, at over 65%. Cambridge has the lowest proportion of stock over 30-year-old at just 41%
- 32.7% – the proportion of London’s BREEAM-rated buildings that are rated as Excellent or Outstanding
