As sustainability climbs rapidly up the legal and political agenda globally, many European cities are now implementing local as well as national policies designed to drive improvements in energy efficiency across the built environment in particular. The real estate team at Hogan Lovells contrasts the approaches being taken in five major cities.
Sustainability is one of Amsterdam’s top priorities. The city government has set a number of goals, such as a 75% CO2 reduction by 2040, to future-proof the city. To achieve its plans, Amsterdam is collaborating and seeking agreements with, amongst others, real estate developers and housing corporations.
National laws require all office buildings to have an energy performance rating of A, B or C from 2023, and the government can order that the use of a building ceases if the rating is D or lower. The legislation is expected to become even stricter over time, with all office buildings likely to need an A rating by 2030, and other asset classes being brought into scope in the future.
Article 8 of the EU’s Energy Efficiency Directive has been implemented into Dutch law, requiring large businesses to measure and reduce their actual energy consumption by carrying out energy audits every four years. The first audits had to be carried out by 5 December 2015, so most businesses are now approaching their second audit.
With its municipal targets and national and regional laws, Amsterdam is making important strides towards its sustainability goals.
Carola Houpst, senior associate, Amsterdam
Sustainability is a duty across Germany, including in Düsseldorf. Germany’s goal is to increase the use of renewable energies by 14% by 2020, and is seeking to achieve this through legislation and practice. For instance, the German Sustainable Building Council certifies buildings with special sustainability characteristics, and the ZIA (the German Property Federation) has produced a precedent Green Lease that, when used, it is hoped will result in buildings being occupied and maintained in the most sustainable way possible.
Energy Performance Certificates have been in use since 2008 and, since 2014, sellers and landlords have had to show the EPCs in marketing materials for sales and lettings, or pay a fine of up to €15,000.
Article 8 of the EED was implemented into German law by the Energy Services Act, which introduces a systematic procedure for obtaining sufficient information on energy consumption profiles. The Energy Services Act requires all businesses, except for SMEs, to undertake energy audits. The first compliance certificates are only valid until 5 December 2020 and so are now coming up for renewal.
So in summary, energy efficiency measures in Düsseldorf are on the rise.
Sabine Reimann, partner, Düsseldorf
Sustainability is high on the political agenda in London right now, and real estate is one of the key areas of focus. EPCs have been around since 2007, and for several years were nothing more than a compliance tool, but under Minimum Energy Efficiency Standards legislation landlords now cannot lawfully grant leases of poorly-rated premises without an exemption, and from 2023 continuing to let those premises will be unlawful without an exemption, too. Now both investors and occupiers wishing to sublet should think carefully about the energy efficiency of their buildings and start to upgrade space where they can in order to improve EPC ratings and avoid being left with stock they cannot let.
The Energy Savings Opportunity Scheme (the UK implementation of Article 8 of the EED) helps businesses to measure their energy consumption and identify where they can achieve savings. Also, participation in benchmarking tools such as GRESB is growing as investment managers compete to achieve the best rankings and win the best mandates. This all helps to increase the implementation of energy efficiency measures in both new developments and existing buildings.
Simon Keen, counsel, London
Milan has a strong focus on sustainability. Thanks to a skilled public administration, innovative planning rules and a thriving real estate market, Italy’s financial capital is experiencing a boom in urban renovation, with refurbishment projects in all real estate sectors.
In fact, in addition to the industrial sector (where energy efficiency interventions on productive sites are already well-established thanks to what is known as the “white certificates” incentive scheme) and the residential sector (where there are significant tax incentives for carrying out energy efficiency works), new incentives have been introduced by national legislation for both new and existing buildings, including a particularly favourable tax regime for the transfer of brownfield sites for renovation projects.
New planning regulations currently being adopted in Milan have supplemented these national incentives, envisaging significant building bonuses for specific types of energy efficiency interventions. This has further boosted refurbishment.
Another boost to the renovation of existing buildings comes from private investment; historically, Milan has attracted foreign capital and – as home to several multinational companies – it has a significant percentage of offices with LEED and BREEAM certificates. Further private investment, and the renovation of yet more public buildings, is expected in the run-up to the 2026 Olympic Winter Olympics.
Maria Deledda, counsel, Milan
Sustainability is at the heart of the French public authorities’ concerns. For instance, a national law from November 2018 requires action to be taken to reduce the energy consumption of certain existing buildings by at least 40% by 2030, 50% by 2040 and 60% by 2050, compared to their energy consumption from no earlier than 2010. The French government issued a decree on 23 July 2019 setting out when this law will apply and, in particular, the actions to be taken by building owners and occupiers to achieve these reductions and the enforcement options available to public authorities (which could include fines for non-compliance).
A draft law on the circular economy, which is currently being discussed before the French parliament, aims to reduce the volume of waste being thrown away in France and to improve recycling rates. If passed in its current form, it will set out roughly 50 measures to be taken, including stricter obligations that will apply before any demolition or significant refurbishment works are carried out to existing buildings. Developers could be required to improve their management of the products, materials and waste deriving from their works, with specific obligations on the reuse and recycling of materials.
Laure Nguyen, counsel, Paris