The Impact of Minimum Energy Efficiency Standard (MEES) on Retail and Distribution Businesses

The Minimum Energy Efficiency Standard (MEES) was announced in April 2015 and the legislation comes into force April 2018; impacting approximately 20% of commercial properties it essentially states that all commercially let units must meet a minimum energy efficiency rating. Designed to impact the worst performing units the legislation will be tightened in 2023.

What is the Standard?

As with your house every commercial building has an Energy Performance Certificate rated from A (best performing) to G (worst performing), the MEES initially introduces a minimum standard of E which could be tightened further to D. Warehousing units are hit in particular because they are generally rented and don’t tend to be insulated but are rather shells with very low energy efficiency.

There are a few instances where MEES does not apply but it may be worth seeking expert advice if you are unsure:

  • Buildings not required to have an EPC: such as industrial sites, workshops, non-residential agricultural buildings with a low energy demand, certain listed buildings, temporary properties and holidays lets;
  • Buildings where the EPC is over 10 years old or where there is no EPC;
  • Tenancies of less than 6 months (with no right of renewal);
  • Tenancies of over 99 years.

What is the Impact?

Most businesses I have spoken to are aware of the impact that this legislation carries and have adjusted their property strategy accordingly, there are however, a number of companies who have not managed this risk and remain exposed.

After this was announced B&Q immediately said they would be closing 60 stores within a 2 year timeframe; the majority of their properties are warehouse retail units with low energy ratings. As such from April 2018 the retail giant would not be able to operate from these sites; there are heavy fines for businesses that continue to rent underperforming units with the onus on the landlord to pay for upgrades.

Proactive landlords have been working with tenants to upgrade sites to meet the standards and also create more desirable retail units; there are a number of small retail parks that have been through this modernisation. In uplifting the quality of units more retailers have moved in generating more custom and the landlords see a better rental yield. Halfords especially have been taking advantage of this and I’ve seen a number of their stores being upgraded rather than closed.

What is the Relevance?

As a specialist recruiter within retail and distribution I do more than just provide executive search and headhunting services, I work closely with clients to support them across a range of issues. To do this I take the time to understand changes within the sectors I operate and the corresponding challenges these present to my clients.

For further information here are a couple of good resources:
https://www.burges-salmon.com/news-and-insight/legal-updates/a-guide-to-the-minimum-energy-efficiency-standard-for-commercial-buildings/
http://www.building.co.uk/sustainability-minimum-energy-performance-standards-for-commercial-buildings/5069388.article

 

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