Manchester’s property market is booming, with commercial space becoming even more sought after. According to recent reports, commercial vacancy rates in Manchester have dropped to just 10%, making it one of the most competitive property markets in the UK. With vacancy rates so low, businesses are competing to secure premium locations. But how can you ensure your property stands out and retains its value in such a competitive environment?

Direct Impact of EPC Ratings on Commercial Property Values

If you are completely new to the world of Commercial EPCs, we have a section dedicated to exploring the fundamentals of the subject. Find it on our Commercial EPC in Manchester page with links to deep dive articles, like this one.

As Manchester becomes more environmentally conscious, both commercial buyers and tenants are turning to the Commercial EPC to get the information they need. Interest rates are still above historical averages and energy costs are high. The EPC document provides a way to understand the potential energy consumption of a building before committing to it.

With sustainability high on the agenda, companies are under increasing pressure to meet corporate social responsibility goals. A higher EPC rating signifies lower carbon emissions, which is attractive to businesses looking to reduce their environmental impact while benefiting from lower energy bills

Understandably, those properties with a higher EPC rating command a higher value at market. This is due to these properties being less likely to require significant upgrades whilst saving future owners or tenants on overhead energy costs.

Commercial buildings in Manchester with a higher EPC score probably have a modern heating system, are well insulated and maybe even have additional technologies like solar. For this reason, buyers, tenants and even lenders are starting to view the EPC as a kind of condition report.

Properties at the lower end of the EPC scale will probably need some additional investment to bring it up to par. In turn, reducing its market appeal and perceived value.

Commercial EPCs & Manchester Rentals

In addition to higher market value, properties must comply with Minimum Energy Efficiency Standards (MEES) to remain legally viable.

As of April 2023, all commercial rental properties require an EPC of no less than a Band E. Properties that do not meet this standard can lose the investor market, reducing it's value.

Failure to comply with MEES regulations not only reduces the pool of potential tenants but can also lead to significant fines, making compliance not just a regulatory necessity but a smart business move.

EPC Ratings and Investor Confidence

With investors needing a minimum score of a Band E to be able to lease their properties, the value of those below this cut off decreases to account for the additional work required to achieve the band.

Currently the cut off is a Band E, but by 2035, this will have increased to a Band B. The interim target of all privately rented non domestic buildings reaching a Band C will be enforced by 2028.

With the next set of EPC minimum standards coming into play by 2028, investors are taking note. Buildings that do not meet the Band C rating will see their value drop as the cost of upgrading them increases year by year.

Investors who delay upgrading their properties risk finding themselves with stranded assets that are difficult to sell or lease.

Through increase rental income and reduced maintenance costs, properties with the highest EPC ratings present a lower risk investment opportunity with higher long term returns.

Financing and Manchester EPCs

Lenders have the same concerns as investors.

Mortgages are provided over long term timescales and lenders need to ensure long term viability of their customers asset. Properties in Manchester with a higher EPC rating are perceived as a lower risk opportunity with reduced operational costs.

We're seeing lenders begin to offer reduced interest rates for these lower risk applications. Specific products, like Green Mortgages, are now on the market which rely on the EPC score.

Green finance is becoming a significant part of the commercial lending landscape, and buildings with higher EPC ratings are often rewarded with preferential loan terms. Green Mortgages, which offer reduced interest rates, are available for buildings that meet high energy-efficiency standards. This makes it not only an environmental decision but a financially strategic one

At the other end of the scale, potential buyers of a property with a poor EPC rating, may not be able to finance it. Some lenders are enforcing their own minimum standards, which is most commonly a minimum of an 'E' Band. Those that will finance the building may charge a higher rate for it.

With green initiatives gaining momentum, several government schemes offer financial support for energy-efficient upgrades, making it easier for landlords to achieve higher EPC ratings.

Navigating the future of commercial property in Manchester means staying ahead of EPC regulations. Ensure your property retains its market appeal by booking an EPC assessment with us today.