Last year was particularly tough for commercial real estate in London. Offices, in particular, were hardest hit, driven by the ongoing impact of working from home (WFH) and consequently, many tenants downsizing post-pandemic.
Concern among the industry reached such levels that it forced some to ask whether London office space was a “sleeping giant or a dead duck?”
For many investors — especially those in B or C-grade office space in unattractive locations — the more pressing concern is what to do next amid fears that their assets risk becoming stranded.
It was a topic discussed at length in an article by IPE Real Assets as it looked to address the challenges of repurposing an office landscape that is in danger of becoming increasingly obsolete.
It talked about the “urgent need to find viable alternative uses for underutilised space – not just for the benefit of investors and developers, but also for the communities affected by vacancies.”
Repurposing to beat commercial market blues
As the analysis makes clear, one way to address these issues is to repurpose existing stock.
Aside from the obvious cost implications of demolishing an existing property and opting for a new build, it also triggers a string of planning requirements in areas such as affordable housing and carbon emissions, which are a particular concern for institutional investors.
Which is why repurposing existing property is so attractive. This includes retrofitting smart technology or changing business models to space-as-a-service (SPaaS) — both of which allow investors to add value and provide flexible, green and social leases.
But while repurposing gains traction, it begs the question: “Could the in-situ retrofit of smart tech upgrade the space to a level that would retain existing tenants and attract new ones?’
In our experience, the answer is ‘yes’. Not only does such an approach improve energy efficiency, but can also reduce operational costs by up to 30%.
Making the financial case for repurposing
As investors look to diversify their portfolios, thorough financial and economic assessments become a priority.
If investors are to maximise their ROI, core base-build control systems that are focused on operational efficiency and sustainability must be smart-enabled. And they need to be capable of being extended into tenant areas and support a wide variety of markets and use cases.
But with the right quality, technology, service offering and location — as well as access to capital to repurpose — there is huge potential.
Looking ahead
It’s clear that tech infrastructure is at the core of these market trends. In fact, I would go further and say that it’s becoming essential for landlords looking to attract and retain premium tenants.
And it provides opportunities to facilitate new service-based relationships, green or social leases and reduce overall operating costs for a variety of office-based businesses.
Looking ahead, the key priorities for building owners this year include ensuring legislative compliance and upgrading building technology for functionality and flexibility — all while catering to a diverse range of tenant needs.
Ultimately, repurposing with smart technology provides both investors and landlords with properties that undoubtedly bring a profitable new lease of life to the market and offers both tenants and occupants a more attractive workplace experience.