Environmental Focus/Continued
Net zero carbon building audits During the year we undertook net zero carbon building audits at five representative assets across our portfolio. These took place at our office assets at Pembroke Court, Chatham and 401 Grafton Gate, Milton Keynes, our retail warehouse asset in Bury and our industrial estates at Luton and Radlett. In respect of the office assets, the reports assessed the energy performance of the assets using the UKGBC targets for reduction in Energy Use Intensity (EUI) required to meet the 1.5°C global warming target for 2030 and 2050 and identified the interventions required to achieve these reductions. In respect of the retail and industrial assets the reports used the Carbon Real Estate Risk Monitor (CRREM) targets for the same years and same climate target. In each case, the reports indicated the interventions required to deliver the reduction in EUI. These were principally to the internal building systems (for example, replacing gas based systems with electric systems), external fabric (for example, PV systems and improved solar shielding) as well as changes to the operation of the buildings (for example implementing smart building management systems). Whilst the characteristics of every building differ, the output from the reports has been valuable in helping us refine our refurbishment guidelines, management regimes and begin the process of setting individual asset net zero carbon strategies. Green lease clauses Green leasing continues to be an important tool to enable us and our occupiers to improve the performance of a building. The ideal green lease will help enhance the environmental performance of a building, mitigate any environmental legislative and market risk and foster improvements in data collection. Our bespoke set of green lease clauses represent best practice and continue to be successfully incorporated in new leases and lease renewals. We continue to review and amend these clauses accordingly where appropriate.
Over the year, we completed 64 green leases. We will continue to use lease events and letting of vacant units to drive further take up. Minimum Energy Efficiency Standards (MEES) We continue to improve the EPC profile of the portfolio. Looking at the percentage of EPC ratings by estimated rental value (ERV) of our portfolio, 76% have an EPC rating of A-C and 24% are D or E. For the year to March 2022, 71% of the portfolio was rated A-C by ERV. We continue to proactively manage our compliance with MEES, which, as of April 2023, prohibits leasing space that is F or G rated, unless an exemption certificate applies. We have one small non-compliant industrial unit, for which we are in the process of applying for an exemption due to its very basic construction. Over the year we reassessed 38 EPCs. Using the same reporting basis as above, 79% have been reassessed to an A-C rating, 21% a D rating, and none were E, F or G rated. We continue to use lease events, common area works and EPC renewals to implement improvement works with the overall aim of continually improving our EPC score and ensuring compliance with MEES. The minimum EPC rating is likely to be raised further, with the UK Government having consulted in 2021 on proposals to require a minimum rating of a C by 1 April 2027, and a B by 1 April 2030. The outcome of this consultation is awaited. Notwithstanding the legislative position, we see alignment with MEES regulations as integral to our net zero carbon pathway, occupier engagement strategy, and environmental focus. We will continue to proactively manage the portfolio on this basis.
Our bespoke set of green lease clauses continue to be successfully incorporated in new lettings and renewals. Jay Cable Head of Asset Management
76% EPC ratings A-C 64 Green leases completed
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Picton Property Income Limited Annual Report 2023
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