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Will your property pass the new MEES energy test?

There are now only six months until the new Minimum Energy Efficiency Standards (MEES) are implemented. This sweeping change due in April 2018 will rule out any new or renewed leases on commercial property with an Energy Performance Certificate (EPC) rating of F or G.

Time is running out and landlords with commercial portfolios would be well advised to prepare carefully, or risk losing out on significant amounts of rental income.

Below are some key tips to help protect you from inadvertently allowing your property to become ‘unrentable’.

Organising a well-maintained property database

    Having a comprehensive and accurate property asset list, including a detailed record of current EPCs, is invaluable when it comes to compliance with MEES legislation.

    Open communications with all parties involved in changes to your portfolios will help you to keep on top of your assets. This way you are fully aware of assets that are being sold, refurbished or tenanted.

    Keeping a stringent log of tenant movements will result in an asset list that can quickly and easily be referred to for accurate and current data. This will reduce time and resource required to draw information from multiple sources and avoid any duplication of effort required to collate the data.

    It is essential that good EPC records are kept. They should detail the EPC rating, date of expiry and EPC address, which is often different from the addresses known to property management teams. It is worth remembering that EPC’s can be commissioned by any individual. A tenant may have authorised a new EPC since the landlord last ordered one.

    Reassess EPC ratings

    An EPC is based on the characteristics of a building and its services (such as heating, ventilation, air conditioning and lighting). As such, energy assessors often do not have detailed and updated information about a property.

    As a result, they need to gather as much information as possible during their EPC site assessment visit, modelling their findings before determining the EPC asset rating. With time constraints and a lack of readily available information, existing EPC’s are often based on assumptions, conventions and default settings. These will represent worst case scenarios. They often do not provide an accurate representation of the current building status.

    Before refurbishing a property with an EPC that is currently considered sub-standard, we would recommend that its building energy model is re-assessed to eliminate as many estimates as possible and improve the EPC rating.

    Don’t limit your analysis

      There are a number of additional factors you should consider to ensure a comprehensive understanding of your risk exposure:

        Listed Building status.

      Despite popular belief, listed buildings are not exempt from EPC legislation. In fact, they are likely to fall within EPC F and G bands because of their poor fabric specifications in terms of energy performance (single glazing, uninsulated walls etc).

        E-rated EPC buildings.

      EPC’s are linked to the UK Building Regulations, Part L, which are regularly updated and become more and more stringent each time they are revised. Hence previous EPC’s, whose Asset Ratings were E, may fall within the F & G categories once their 10 years validity period has expired.

        Rental Values.

      If refurbishment works are abandoned in favour of offering sub-standard properties, landlords will not be permitted to market buildings with a subsequent loss of rental income. The rental value per annum, per square metre, should be taken into account in order to undertake suitable risk assessments and prioritise remedial actions.

      Two birds with one stone

      Many owners are unsure about their exposure to MEES compliance risk. That’s why undertaking a desktop review is vital. You can also save time and money by simultaneously commissioning reviews of additional environmental compliance risks when third-parties are involved in determining MEES risk exposure.

      For example, ever changing climatic conditions often reassert the importance of understanding flood risk. Property owners therefore need to understand their risk exposure to reduce business threats and develop action plans for guaranteed business continuity.

      MEES however provides the perfect opportunity to ask further questions about the environmental legislation agenda. Property environmental compliance risk exists in many areas including air conditioning inspections (ACIs), ESOS energy audits and asbestos registers among others.

      On top of providing a valuable assessment of regulatory and non-mandatory environmental risks, high level reviews also highlight opportunities, like solar PV installation, that impact on the wider business.

      Plan ahead to ensure leases provide protection

      You must consider the risk that a tenant could carry out works that may lower the EPC rating, thereby affecting re-letting once the property becomes vacant. Whenever the opportunity arises, owners should be looking to introduce provisions against the tenant carrying out alterations thatadversely affect energy performance. You may also wish to restrict the tenant’s ability to commission its own EPC, as this would invalidate the existing certificate.

      At the same time, the new regulations are also an opportunity for greater engagement with tenants through the use of green leases. A green lease is a standard form lease with additional clauses included which provide for the management and improvement of the environmental performance of a building. Both owner and occupier can agree carbon, energy, waste and water reduction strategies which best fit with the circumstances of individual properties.

      Conclusion

    Using some or all of these strategies, landlords can safeguard themselves and their portfolios ahead of MEES – and potentially ensure not only that they are scraping by for compliance, but that they are leading the way in terms of property and asset management, and demonstrating the value of this attitude when it comes to environmental protection.There are now only six months until the new Minimum Energy Efficiency Standards (MEES) are implemented – a sweeping change due in April 2018, that will rule out any new or renewed leases on commercial property with an Energy Performance Certificate (EPC) rating of F or G.

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Best areas for property investors in Wirral?

Many of our clients are from out of area and want advice on the best areas to invest in the Wirral. When investors come to our offices for the first time we sit them down in front of the large Wirral wall map and discuss what the area is like, highlighting the areas that are probably of most interest.

Not everyone can make it to us in Hamilton Square, so for those investors from further afield here are the main highlights of my regular introduction to investing in the Wirral.

The peninsula is an oblong shape, roughly 15 miles long by 7 miles wide, bisected by the M53 motorway which runs north to south through the middle of the area.  The major towns are Birkenhead and Wallasey to the east and Heswall and West Kirby to the west.

 

Although a bit of a generalisation, the east tends to be older, higher density and lower value properties whilst the west has larger higher value property.  To get a higher yield from your investment property you should be looking in the east, and this is where we will be concentrating on this post.

Major areas of interest:

Central Birkenhead, around Laird St and Park Road North.

North Birkenhead (locals call it The North End), but selective parts only.

Tranmere, especially the area between the parks.

Rockferry and parts of New Ferry.

East of Wallasey and Liscard, but not Seacombe.

New Brighton, especially the south and older properties in the east.

Parts of the Noctorum, Beechwood and Woodchurch estates.

The Wirral is unusual in that it is fairly common to have some very high value property enclaves abutting run down areas and particularly difficult streets.  Local knowledge is key to ensure you buy in the right areas to maximise your rent and avoid the known problem areas.

Contact Andrew@hamiltonsquareestates.com for more information

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New build property investment returns: Liverpool V’s Manchester V’s Birkenhead.

We have all heard a lot over the past months about the death of new build buy to let investment in the UK. Undoubtedly the second homes SDLT surcharge has caused investors to carefully consider the maths for new purchases. Likewise, the upcoming changes to the taxation of mortgage interest relief will cause many landlords with existing portfolios to reconsider their position. So with these changes already known, why is BTL still considered not just a viable, but a desirable investment?

My area of interest is the North West of England, particularly the areas around Manchester, Leeds and Merseyside. We presented a couple of investment seminars at this year’s Homeowner and Property Investor Show in Docklands Arena. They were standing room only, so we know there is plenty of interest from out of (our) area investors wanting to buy here. We also run tours for investors around the local area to highlight the vast range of projects currently underway (see Liverpool and Wirral Waters, the new Liverpool 2 port, China Town, Salford Quays, et al in my previous posts). We have around 2 groups a week here from London for our own Grand Tour – think Clarkson, Hammond and May but with fewer car crashes and more coffee.

The most regularly asked question is about the comparative returns available on new build between Manchester, Liverpool and Wirral, and what are the prospects for the 3 areas.

My own view is that they all have their own merits, depending on your aims. There is no space on this short post to go into too much detail, but in brief:

    Manchester

Manchester offers the widest range of existing high quality provision. The market for better quality apartments is more mature than the other areas, and the job prospects for the city are very good. Unfortunately this is reflected in the prices, with current new build 1 bed flats achieving around £2,100 per M2. Prices start around £110,000 per unit for mid-range developments on the periphery of the city centre. Rents are high compared to the wider region, but so are prices. Despite this gross yields are around 5.5%, with net yields of 4.2% in better quality new-build sites.

    Liverpool

Liverpool has seen very rapid development, in the past 5 years particularly, driven by the rapidly improving local economy and some major infrastructure investments. Prices are still far below Manchester levels but rising quickly, as are rental rates – 1 bed flats close to the river regularly go for £685 pcm. If you are looking for an absolute bargain you are probably 18 months too late, although there are still some very good buys available if you know where to look. Prices range from £1,500 – £2,000 per M2, with the prices rising the closer you get to the River Mersey, particularly in the L1, L4 and L69 postcodes. Gross yields are averaging at 7%, or 5.6% net.

    Wirral

Wirral is still the wild west for new build investors. Until recently there was not much good quality stock to buy into, although things are now changing. A number of schemes are completing and there are other interesting developments in the pipeline around the Birkenhead and West Kirby areas in particular. The area benefits from being only 10 minutes by train from Liverpool centre. We see more people moving from Liverpool to Wirral to take advantage of the lower prices whilst still retaining access to the big city experience. Good quality stock goes for around £1,400 per M2. Gross yields are holding at 8.5%, Net around the 7.2% level.

conway-st-to-tunnel

So, who comes out top? For range of options Manchester is difficult to beat. If your target investment is only city centres then Liverpool is a very good bet, especially the area south of the Albert Dock and into the Baltic Triangle.

However, our winner is Birkenhead. Our view is that east Wirral in particular offers the best opportunity for price increases in the next 1 – 5 years, coming off its current low (some would say undervalued) base.

With low but rising prices and high yields, coupled with the 10 minute transit time to Liverpool city centre for both work and leisure, Birkenhead is our top tip for property investors in the region.

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Merseyside tops Property Investment league table

I post regularly on some national blogs, and have included a copy below of something that affects all local investors.  It is a map showing likely investment returns for all areas of England, and Liverpool has done well as expected.  However, my gripe was with the mapping which put Wirral in with Clwyd for some reason.  Extracting this and combining all Merseyside as one entity puts our area firmly at the top of the table.  A link to the original post is below, with my comments under this.

https://www.lettingagenttoday.co.uk/breaking-news/2016/5/revealed–where-the-highest-rental-yields-will-be-in-2020-apparently

 

Interesting article. My only complaint is with whoever drew up the mapping and their reasons for drawing the boundaries as they did. My area of interest is Merseyside and North Wales and so took particular note of this part of the map. Three points to note are:

1. Wirral is part of Merseyside and should have been included within their boundary, not Clwyd. Wirral currently has some of the highest yields of anywhere in the country, even higher than Liverpool. Inclusion of Wirral within the Liverpool map would have pushed Merseyside to the very top of the returns table. Prices in Wirral are some 10- 15% lower across the range than comparables in Liverpool, but rents are almost identical for all property types outside the immediate Liverpool city centre area.

2. Wirral will be included within the area of the Merseyside metropolitan area under control of the new Metro Mayor from next year. So far, so dull. However, Wirral will then be subject to the policies of new Mayor, with devolved powers that affect housing, transport and inward investment. The Mayor is likely to be Joe Anderson, the current Labour party Mayor of Liverpool. You may or may not like some of his policies but he has a good track record of leveraging in funds for the city region. His policies for housing and transport in particular look credible, and he has a very good track record of representing the Liverpool region on the international stage, bring in more investment.

3. There are huge programmes of infrastructure improvements and inward investment on both sides of the Mersey that should push values on at pace equally in Liverpool and Wirral. These are being instigated by Peel Group (owners of pretty much the whole of both banks of the River Mersey) under the banners of Liverpool Waters and Wirral Waters. House prices do not yet reflect these major upcoming changes and so yields will remain high in the medium term until prices reflect these improvements to the Mersey basin area.

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Property Investor Show April 2016 – Hamilton Square Estates, CH41 Wirral, UK

Invest Northwest Seminar - Hamilton Square EstatesHamilton Square Estates recently attended the Property Investor Show at London ExCel and were overwhelmed by the interest shown in our seminar on “Invest Northwest” and at our Stand in the main Exhibition Hall.

Over 200 delegates attended our seminar, with many having to stand, and the general consensus of the audience was the amazement at the exciting infrastructure and property projects already completed and planned in the Northwest. The presentation describes many of these projects, provides an overview of the region, and identifies some of the considerations in investing in the area. This presentation is available to view and download here: [button link=”https://hamiltonsquareestates.com/wp-content/uploads/2016/04/Seminar-Presentation-Pack.pdf” target=”_blank” arrow=”button”]Seminar Presentation[/button]

 

Hamilton Square Estates - Stand 1Our stand had a constant flow of visitors throughout the two days with over 100 delegates registering their interest in Hamilton Square Estates and our extensive services.

Our brochure is also available to view and download here: [button link=”https://hamiltonsquareestates.com/wp-content/uploads/2016/04/Brochure-v4.2-FINAL.pdf” target=”_blank” arrow=”button”]Brochure[/button]

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Changes to energy efficiency requirements

The Government has must announced the dates by which rental properties are required to meet certain energy efficiency measures.  These are related to the property’s EPC and are as follows:

April 2018: by this date it will be unlawful to let out a property with an F or G Energy Performance Certificate rating, as a new let. There will be a few limited exemptions.

April 2020: by this date the requirement for a minimum E rating will apply, not just to new lets but also to existing tenancies.

2025: the target is for a minimum D rating.

2030: the minimum target will be a C rating.

 

If any landlords are concerned about what this means or how to implement the requirements then please call either Andrew or Elaine for advice – we are always happy to help where we can.

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L2 ports development moves forward

THE arrival of a giant vessel bearing five ‘megamax’ quayside cranes for Liverpool’s new deep water port has been hailed as a “truly unique day” in the city’s maritime history.

The eye-catching red cranes, which sailed up the River Mersey on Monday, were built in Shanghai and have been transported more than 18,000 miles to their new home in Liverpool.

The new cranes mark the start of a new era for the Port of Liverpool as the most visible element of Peel Port’s £300m investment to create the UK’s most centrally located deep water container terminal.

The cranes were produced by Chinese company, Zhenhua Heavy Industries Co (ZPMC), the largest heavy duty equipment manufacturer in the world, as part of a contract with Peel Ports worth more than £100m.

A total of eight ship-to-shore megamax cranes and 22 cantilever rail-mounted gantry cranes are being supplied to Peel Ports as part of its investment programme to expand and develop the Port of Liverpool.Liverpool2 cranes arrive

Each crane measures 92 metres high to the top of the frame, approximately the same as the city’s  iconic Royal Liver Building, and 132 metres high when the boom is raised. Each crane weighs around 1,600 tonnes.

Liverpool2 is the UK’s largest transatlantic deep-sea port and container terminal and the investment in facilities will allow it to accommodate the majority of the world’s current container fleet, including vessels up to 20,000 TEU (twenty-foot equivalent units) or two 13,500 TEU vessels simultaneously.

Mark Whitworth, chief executive of Peel Ports, said: “This is a truly unique day in Liverpool’s long maritime history. The spectacular sight of these cranes sailing up the Mersey to the L2 site is unprecedented. Our investment in leading-edge infrastructure and technology will allow Liverpool to offer the quickest and most cost-effective route to market, not just for goods destined for the north of England but also for Scotland, Ireland, North Wales, opening up a new logistics routes estimated at four million TEU every year and increasing potential import and export trade.”

The cranes will have the ability to operate at speeds in excess of 30 moves per hour and will facilitate an anticipated 1,500 moves in each tidal window.

The combination of infrastructure and technology will reduce the time taken to transfer containers from port to road or rail, helping the Port of Liverpool to achieve targets of 65% of haulage turned round in 30 minutes and 95% of haulage turned in 60 minutes.

 

So, what does this mean for us property people?  It is a sign that all the huge infrastructure developments talked about over the past few years are actually going to happen.  When you see the L2 plans together with Wirral Waters it shows the scale of what is happening in the local economy.  Investment means jobs, and jobs mean increasing property values – both commercial and residential.  It won’t happen overnight, but I am increasingly positive about prospects for the Merseyside area.

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Maritime Hub – Wirral’s new Innovation Centre

Yet more about improvements to the local economy, this time the Maritime Hub Innovation Centre at Four Bridges.

 

I have blogged about this in past weeks but now have a good video clip that explains more.

 

I drive past this site every day and can see what is happening.  Things are starting to come together and this new training and knowledge centre will no doubt become an important driver for the higher tech / higher quality jobs that are the future of any major economy.

 

Peel Holdings, who own the site, have a strategy to develop the Mersey basin.  Both local and national government have latched on to the possibilities here and there actually seems to be some joined up thinking going on.  The possibilities to redesign the city region’s economy are immense.  This Maritime Hub will no doubt play an important part in supplying the training and support needed to achieve this.

 

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Bigger container port for Liverpool – more jobs for Wirral

Plans are well advanced for a bigger container port for Liverpool, bringing the biggest container ships in the world to our doorstep.  Called post-Panamex ship, they can carry 25% more cargo than previous types.  The new facility will be built adjacent to the existing container port at Seaforth.  I have attached a video link below that gives more detail:

 

So what does it mean for us in Wirral and Liverpool?  In a word – jobs.  Peel Ports are the owners of the site and they say it will take 2 years to construct.  Once opened it will become the centre of container distribution for the UK.  This means we can expect some high quality, high paying jobs to be here during construction.  When the port is operational we will benefit from the increased train and road traffic, as well as the jobs that come with operating the port itself.

I am here to read about property stuff, why does this mater to me?

It matters because it is part of the theme of regeneration that is centred around Wirral Waters and Liverpool Waters, and because any major uplift to the local economy will affect house and commercial property prices in our area.  This is another game changer for our local economy.  Put alongside the waterfront developments on both sides of the Mersey it will have a major beneficial impact on everyone who has invested in property in our region.

I have said it before in previous blogs, but Merseyside is about to go through a period of immense change.  Canny investors see this and are already positioning themselves to take advantage of the changes ahead.

 

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What is Wirral Waters?

A client has just been to view 3 of our investment properties currently on the market.  They are all in an area close to East Float in Birkenhead.  After showing her the houses we chatted about what was happening locally and I was surprised to hear she was unaware of Wirral Waters.  So what is Wirral Waters and how will it affect you?

Wirral Waters is Peel Holdings plan to develop the Wirral side of the Mersey into an international trade and development area.  Allied to that are plans to also build a technology and innovation centre, with the whole thing centred around the East and West Float areas between Wallasey and Birkenhead.  It will be Europe’s biggest building site during construction and will transform the Wirral when complete.

I have attached a video link which explains things in slightly more detail, although there is much more about Wirral Waters available on-line for those who want to know more.