CLIENT

CONSULTANCY TYPE

THE TASK

UK legislation requires buildings that are commercially rented to meet minimum energy efficiency standards (MEES). Currently this is set as the possession of an ‘E’ rated energy performance certificate (EPC). However, as part of its drive to achieve a global commitment to being net-zero carbon as a nation by 2050, the UK government published an Energy White Paper in December 2020 stating its intention to raise this to a ‘B’ EPC rating by 2030. It has since consulted on introducing an interim standard of a ‘C’ rating by 2027. Currently only about 18% of the UK’s commercial properties have a ‘B’ EPC rating.

In response to this the abrdn Property Income Trust (APIT) set a fund-wide ESG strategy to include every building in the portfolio possessing either ‘C’ or ‘B’ EPC ratings. This was to increase the fund’s resilience to future legislative demands and meet increasing investor expectations on ESG related issues. The fund also stipulated that the timetable to achieve these ratings must fit with the Carbon Risk Real Estate Monitor’s (CRREM) calculations on when the asset would become ‘stranded’.

Following a pilot of the newly built APMR methodology and reports, abrdn commissioned an RICS-NRM compliant asset register for each asset in the fund along with two APMRs – one showing the cost plan to achieve a ‘B’ EPC rating and one to achieve a ‘C’ EPC rating.

They also requested a summary report showing how the recommendations of each APMR aligned with the Carbon Risk Real Estate Monitor tool (CRREM) trajectories on when real estate assets would become ‘stranded’ in terms of value and ability to be sold.

OUR APPROACH

Resero already works with abrdn under a framework contract for mechanical, electrical and public health consultancy which includes site visits and quarterly audits of contractors.

Under this arrangement EDGE APM software was already in use to manage these assets including the production of planned maintenance reports (PMRs) detailing service charge recoverable costs such as maintenance, repair and replacement of services on a like-for-like basis.

Our first task was to ensure each PMR had been updated with recent costings given the current volatility in the building supply market. 

We then created digital twins of each building in dynamic simulation modelling software IES VE. This enabled us to verify the existing EPC ratings (which had been prepared by outside assessors) and run various scenarios on each building to identify which improvement works would secure a ‘B’ and/or ‘C’ rating.

The modelling in these cases had to have a high degree of accuracy to ensure recommendations were realistic within the engineering constraints of each building. It also had to account for the knock-on impact of each change. For example, switching to LED lighting is more energy efficient but may mean spaces are colder leading to an increased heating requirement to ensure thermal comfort for occupiers.

The modelling process was also complicated by the fact that the methodology used to calculate these ratings by the government was to change in June 2022 to penalise the use of gas far more heavily, so recommendations had to be assessed against a likely methodology that was yet to be released or able to be fully tested on each asset.

Assessment against the CRREM methodology was achieved through a tailored interface between EDGE APM software and CRREM.

OUTCOMES

Within three months Resero produced 12 APMRs for significant multi-let office buildings. These identified multiple projects where the existing PMR cost plan would have put the building at risk including, but not limited to, replacing VAV and older gas fired 4 Pipe FCU systems with VRF, VRV and potentially Hybrid VRF (dependent on further investigations).

Because of the swiftness of the APMR reports being produced ‘C’ ratings were modelled and changes, mostly lighting upgrade projects, were implemented very swiftly ensuring ‘C’ EPC certificates were secured under the old methodology.  EPCs don’t need to be re-run for 10 years so this has enabled the fund more breathing space to understand and plan the best strategy to achieve a ‘B’ rating on complex assets. It also enables more time to understand the impact of potential operational energy efficiency ratings that may be introduced by the government such as NABERS UK.