Replacing lighting, lifts and other building services kit with the latest energy efficient technologies can increase the market value of shopping centres in the UK by more than 5%, according to new research from the British Council of Shopping Centres (BCSC) and property consultant CBRE. Their report says that the business case for replacing equipment is so compelling, especially for older shopping centres, that “it is worth asking why this has not been carried out more widely already”.
CBRE applied valuation modelling to 35 UK shopping centres to investigate the dynamic between energy efficiency and associated costs, versus shopping centres’ asset value relating to premature scrapping of high energy equipment and replacement with new energy efficient kit. The approach aims to ascertain the impact on rents and yields for occupiers and owners of shopping centres, to highlight energy risks and drive sustainability awareness.
The results show older shopping centres – those over 25 years old – can make potential gains of more than 5% by replacing kit. For an average £100m shopping centre in the UK, this translates to a new market value of at least £105m when energy-intensive equipment is replaced with new equipment where energy-saving features are standard. For relatively modern centres – less than 5 years old – the analysis shows a value gain of more than 1%.
The savings in new energy efficient equipment come from both increased energy efficiency and lower maintenance costs. Most substantial savings come from replacing lighting, escalators, lifts and heating, ventilating systems, and air conditioning (HVAC) units, in that order. Investing in replacement equipment generates savings from operating and maintenance costs, outweighing the total replacement cost.
The report concludes that shopping centre owners should be embedding analysis of energy performance in their asset’s investment philosophy and due diligence process.
Rebecca Pearce, EMEA head of sustainability, CBRE, said, “To finally have evidence to prove that energy efficiency is not just a costly exercise without financial benefits is massive for our industry.
“This needs to serve as a wake-up call to developers, investors, owners and all associated stakeholders that energy efficiency and sustainability isn’t a fad. It’s here to stay, adds real value when implemented properly, and is business critical to the lifecycle of shopping centres. Essentially, if no action is taken owners should expect value erosion or price chipping by future prospective acquirers.”
Sustainable shopping centres – Energy, performance and value can be downloaded from CBRE.