(Bloomberg) -- Landlords of most of the U.K.’s stores and shopping malls may struggle to find tenants by the end of this decade as the properties don’t meet the minimum energy standards of the government’s net-zero strategy.
That’s the finding of a new report from property broker Savills Plc, which estimates that 1.4 billion square feet (130 million square meters) of retail space -- or 83% of all current stock -- will need to be improved by 2030 to comply with proposals that are expected to become law by then.
Around 13% of those buildings could be in trouble as soon as 2023 due to existing legislation that requires minimum energy ratings for commercial properties by then, but at a lower level then required by the far stricter net-zero proposals, Savills added.
The pressure to upgrade thousands of buildings threatens to deepen the existential crisis facing Britain’s high streets after the pandemic accelerated the years-long trend toward online shopping. Many owners of malls and stores are already seeking to convert them into mixed-use or residential properties as the future of brick-and-mortar retail looks increasingly bleak.
Around a quarter of property emissions come from shopping centers, retail parks and high street blocks mainly owned by large well-funded institutional landlords, and so should be relatively easy to improve, says Savills. However, the rest are from smaller premises owned by private landlords in cheaper locations, with fewer backers ready to foot the high cost of retrofits.
The net-zero plan, released prior to this week’s COP summit in Glasgow, aims to tackle building pollution and a raft of other environmental issues in the coming years. Real estate accounts for 17% of the U.K.’s carbon emissions, according to government advisory body The Climate Change Committee. While the target of a ‘B’ energy rating for commercial buildings by 2030 isn’t yet law, the industry is preparing for it to become binding.
“We fully expect that the standards signposted in the recent net-zero strategy will be brought into law,” said British Property Federation Assistant Director Alex Green.
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