The Dutch Housing Minster has announced that he intends to amend the Building Decree (Bouwbesluit) in such a way that as of 2023 office buildings will be required to have an energy label with at least a C-rating. If the building has a D-rating or worse it may no longer be used as an office building. Monuments will, for the time being, be exempted from this requirement.
By imposing a minimum level of energy efficiency for office buildings, the Dutch government is trying to drastically reduce the carbon foot print of buldings. The ban stems for the Energy Accord that the government and several organisations from civic society concluded in 2013. The total energy consumption by office buildings should be cut by 25% as a result of the ban.
Discount on property value
Many in the Dutch market were already expecting some kind of regulatory action to be taken to force property owners to improve the energy efficiency of their buildings. AKD has been at the forefront arguing for some sort of mandatory refurbishment of vacant and inefficient buildings.
However, even though the market has clearly preferred energy efficient buildings over the past few years, investors in Dutch real estate can expect the costs of refurbishing an office building with a D (or worse) rating soon to be priced in. The EIB, a construction industry think tank, estimates that the total investment needed to raise the energy efficiency to the required level amounts to â¬ 860 mil.
Impact on tenants and investment decisions
If an investor needs to upgrade an office building before 2023 he should not only consider the required time frame and the costs involved, but also the implications of the refurbishment on his relationship with his tenants. The EIB and the Dutch Energy Center expect the overall nuisance for occupiers to be limited since most of the refurbishment will regard (HVAC) installations. However, in individual cases the impact on an occupants daily use of the building can be quite severe. This might cause a tenant not to extend a lease of a refurbishment is do, to demand a decrease of the rent or even to try to dissolve the lease if the nuisance of the refurbishment is considerable.
On the other hand: tenants should also realize that if they now lease an office building with a D label or worse, they can expect the landlord will want to refurbish before 2023.
Landlord's will need to think through their property management strategy carefully, especially when it comes to buildings that have been vacant for some time already or that are otherwise not expected to do well. It's not a very appealing thought to have to invest substantially in an office building not knowing if there will be a tenant that allows the investor to recoup his expenses.
Careful planning needed
Anyone who owns an office building that will need a refurbishment before 2023 will have to take stock of the costs and implications of that refurbishment sooner rather than later.
The proposed amending of the Building Decree is expect to be set motion early 2017.