Distrust in energy efficiency solutions providers and lack of a standardised methodology for appraising project viability are discouraging commercial landlords and property investors from making energy efficiency investments.
According to a survey of property investors, the current regulatory framework is also too complex, government incentives are lacking and payback periods for many improvements are just too long.
A survey of 600 property managers and investors by property consultants Tuffin Ferraby Taylor found the principle barriers to energy efficiency are financial, but that a lack of trust in available solutions is also an inhibitor.
The survey found that 90% of respondents said energy efficiency was a higher business priority than five years ago. Three quarters of respondents have also undertaken energy audits of buildings and portfolios. However, only 35% have introduced a formal energy management system.
While 60% of investors said energy policies and regulations have helped them become more energy efficient, 76% said current polices are too complex. Meanwhile, 82% of owners and investors in commercial property said that a lack of government incentives – e.g. tax breaks to direct funding – is now a major barrier to energy efficiency measures becoming significantly more widespread across the UK real estate.
Eight out of ten investors cited budgetary restrictions as the principal barrier to taking action, and claim that energy efficiency projects do not meet financial criteria, and some respondents suggested investing in projects with long payback periods could even reduce a property’s asset value.
Furthermore, three quarters of investors are concerned about a lack of impartiality in the market among advisors and stakeholders.
Two thirds of investors indicated a lack of trust or confidence that end-users of buildings will have the correct support or incentive to implement energy efficiency measures.
“With the removal of government incentives, combined with the sheer complexity and scale of the myriad pieces of energy regulation and policy statements, we have the perfect storm creating an erosion of confidence in the sector that has become a major barrier to implementing efficiency measures,” said Mat Lown, partner and head of sustainability at TFT.
“60 per cent of investors can see the clear investment potential of energy efficiency projects but, to date, investment has been targeted towards the large-scale projects. We hope that with more mainstream banks beginning to provide funding, smaller-scale projects will be able to attract funding streams.
“Lack of confidence came across strongly among many respondents. The market could benefit from standardised methodology for appraising the viability of projects. Particularly among investors, knowing that the advice they were receiving is truly independent is clearly a high priority.”
He added that remains to be seen “exactly how much European legislation will be retained and whether the UK Brexit vote means a more simple approach to energy regulation and policy”.
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