Time to turn down the lights

The City of London Corporation will be asking property owners to dim their lights at night in a bid to achieve carbon net zero in the Square Mile by 2040. The local authority is consulting on a draft plan to create ‘lighting curfews’ for the City starting from 10 – 12 pm, after which buildings will need to dim or turn off unnecessary lights. New developments would have to take these rules into account as part of their planning applications, and existing property owners will be asked to follow them voluntarily, through signing a ‘Considerate Lighting Charter’.  

This plan is only the latest in a string of legislative changes and initiatives to encourage landlords and developers to consider the environmental impact of their operations. With around 25% of the country’s greenhouse gas emissions coming from the built environment, public bodies will continue to put pressure on the sector to go greener. Under new MEES regulations, from 1 April 2023 Landlords will be liable for penalties if they continue to let commercial properties with an EPC rating below E. There are plans to continue tightening these regulations in staged rises, with a minimum requirement of a B rating by 2030.

In fairness, many of these legislative changes reflect a desire amongst the Real Estate and Construction community to reduce its carbon footprint. With many property companies committing to achieving net zero in line with government targets it is increasingly common to see environmental obligations and commitments imposed on occupiers through 'green clauses' in leases. Tenants are being asked to covenant to share data, use renewable sources for energy, or install energy-efficient alterations – the more onerous the obligation, the ‘darker green’ the lease is considered. While the ‘greenness’ of each lease will reflect the specific parties’ commitment to improving their environmental impact, they are becoming more and more market standard. In theory, both landlords and tenants benefit from green leases - they help future-proof their businesses against forecasted policy change and the data shows that occupiers do care – rents for offices with a BREEAM rating, which measures a building’s sustainable value, are 11.6% higher than for similar buildings without. This is the effect of the “green premium” in action - the higher price that a buyer or occupier will pay for a property with sustainability credentials – working in conjunction with the “brown discount” - the loss that unsustainable buildings will face on their asset value.

But how easy will it actually be to ‘green’ the real estate sector? The UK has among the oldest housing stock in the world. The average EPC rating in England and Wales is D, and around 18% of commercial properties are rated F or G. New buildings are more energy efficient in the long term; but demolition generates high levels of carbon emissions. Many in the sector are holding up retrofitting as the answer; the UKGBC last year released a guide encouraging businesses to retrofit the UK’s inefficient commercial property. However, retrofitting comes with its own issues, including building restrictions, planning permissions, the cost of the works, and the difficulty of updating old buildings. Plans to demolish and redevelop M&S’s flagship store on Oxford Street have stalled due to the local council pushing back and encouraging them to retrofit instead. M&S responded that retrofitting the 1930s building would be ‘unworkable’.

In the long-term, further legislation and large amounts of money will need to be spent to bring existing housing and commercial property stock up to a standard needed to achieve our collective environmental goals but the City of London Corporation’s plan demonstrates there is low-hanging fruit to aim at first. A study in 2020 estimated that the energy used in one night by high-rise buildings in Canary Wharf was the same as the energy required to power over 4,000 homes a year. There are still easy wins which can generate significant amounts of energy saving.