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Great swathes of UK retail property could be unlettable from next year, Savills claims. 

The UK government dictates that commercial buildings with an Energy Performance Certificate rating of Grade F or G will be prohibited from being leased. Savills research estimates that 185 million sq ft of retail space is at risk. 

Of the space at risk, Savills reckons only 35 million sq ft is retail park, supermarket or shopping mall space ie that owned by larger investors. Most of the vulnerable space will be smaller shops owned by smaller landlords.

Tom Whittington, commercial research director at Savills, said: “Most retail property emissions are actually not associated with the likes of shopping centres and retail parks, and instead come from the thousands of smaller units often on our high streets and in our town centres. 

“These same areas are also seeing a reduction in investment due to shrinking retail demand, which means converting units to higher standards of efficiency may be unviable in many circumstances with a significant risk of further stranded assets.”

Savills research shows  a clear correlation between retail with the highest voids and least occupational demand and the lowest EPC ratings.

Mark Garmon-Jones, head of shopping centre investment and repurposing at Savills, said: “While it’s no secret that we currently have an oversupply of retail in the UK, this doesn’t mean we can afford to lose more shops simply because they fail to meet energy efficiency standards. 

“More intervention will be required to support landlords throughout this process, whether the intention is for the space to stay as retail or if it’s to find life under a different use through repurposing.”

In the longer term, Savills reports that by 2030, by which time all leased commercial real estate must achieve and EPC rating of at least Grade B, a total of 1.4 billion sq ft of retail space needs to be improved. This is 83% of all UK retail real estate.