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Office owners face €7bn bills to bring properties in line with new EU environmental standards, says Savills

New EU energy rules set tough standards for commercial properties, says estate agent

New EU rules impose tough energy standards on offices that Savills estimates will cost Irish landlords €7 billion. Photograph: iStock

Barry O'Halloran
Wed May 15 2024 - 19:33

Office owners face bills of at least €7 billion to bring their properties into line with tough EU environmental standards, according to estate agent Savills Ireland.

The firm maintains that the European Green Deal, meant to effectively eliminate greenhouse gas emissions by 2050, requires that offices reach at least a B energy rating. Savills calculates that upgrading buildings to the standards that the EU intends imposing under the deal will cost landlords “at least €7 billion”.

Just 2 per cent of offices in the Republic hold an A rating, while six out of 10 are rated D or lower, “underscoring a widespread issue with energy inefficiency in Irish office buildings”, says the firm.

Orla Coyle, Savills’ head of environmental and social governance, warns that the proposed rules will affect businesses’ costs and buildings’ attractiveness to potential tenants.

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“However, upgrading buildings to meet new energy standards is not a one-size-fits-all process. Each project is unique, and costs will vary depending on the building’s condition,” she says.

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Ms Coyle adds that despite these problems, spending on upgrading buildings’ energy efficiency will save cash in the long term, ensure that they comply with future rules, and boost their marketability.

The EU’s Energy Performance of Buildings Directive, adopted last month, mandates minimum performance standards for commercial properties and sets renovation targets that member states must hit.

[ Less than 1% of office buildings occupied by State are A-rated for energy ]

Savills notes that the Energy Efficiency Directive sets targets for the public sector, one of the biggest tenants of Irish offices, to lead by example.

Also, the Corporate Sustainability Reporting Directive demands that businesses report on how they are meeting environmental and social governance standards.

Andrew Cunningham, the firm’s director of offices, predicts that tenants keen to comply with new standards, along with broader environmental considerations, will quickly occupy A-rated buildings.

“Those who act swiftly to secure this high-quality office space will gain a competitive edge, as the availability of such spaces is predicted to fall significantly as 2030 approaches,” he argues.

A breakdown of Irish offices’ energy ratings show that 10 per cent are B rated and 30 per cent reach C standard, while more than one in three are E, F or G rated.

Barry O'Halloran

Barry O'Halloran

Barry O’Halloran covers energy, construction, insolvency, and gaming and betting, among other areas

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