New for old

When is an office building not an office building? In 2022, and most likely beyond.

With a third of Britons still working from home, many office buildings have still not come back to life. A survey by Regus found that 69% of companies are planning to reduce their office footprints and office real estate brokers are talking of a `flight to quality’ while corporate occupiers are taking less space.

So, what becomes of the buildings where leases are up, or whose tenants have been waiting until now to action their break clauses?

Landlord's are increasingly thinking about the individual user when making this choice. The key repositioning options we are hearing building owners considering include:

Let the tenants go
Don’t renew the leases and use this opportunity to carry out major upgrade works, that will drive performance in the longer term. Key upgrade requirements, which many buildings do not currently facilitate, include good quality IT infrastructure and energy efficient controls. The key adjustments to improve end user experience include indoor air quality, climate control, improved toilet and change facilities and lifts. The starting from scratch approach can address these concerns.

Time to get hoarding
Building owners may forgo a full retrofit, and opt instead for more of a cosmetic upgrade to the façade and public areas. Improvements to elements such as public areas, security, toilets or general maintenance will be beneficial to current and target tenants, but need to be weighed against the risk of annoying existing tenants and end users. Retrofit also has its limitations; even buildings from as recently as the 90s may have their architecture protected, limiting façade works.

Service-oriented
Some landlords are not primarily looking to turn a direct profit from commercial spaces, even when in the past these spaces were designed to increase the pounds per square foot return. Owners are increasingly looking to convert these spaces into office amenities such as a gym, exhibition space or other uses that will serve the purpose of placemaking and increasing the attractiveness of the space for the end users. Food and conveniences stores are at the top of end users’ wish lists. Likewise, gyms, green space, meeting areas and touchdown co-working are hugely popular amongst tenants and end users and, a group that is often forgotten, their visitors.

Change use
The final option that is increasingly gaining ground is to change the use altogether. Across the USA, as people increasingly reject the commute, cities are instead valued for their range of events, attractions and vibrancy, making conversion of office buildings to hotels a viable consideration. Hotels are an asset class that, unlike retail and offices, are growing in popularity amongst consumers. And it is a far more environmentally sound solution to reuse a building rather than building one from scratch – to deal with the deep floor plates, there has even been some increased tolerance on windowless rooms amongst hotel brands and approvals boards.

All of these interventions require a strong understanding of not only the wants and needs of both the existing and target users for the building, but also the surrounding buildings, commercial space and public offerings. Gathering data is essential - both qualitative and quantitative – to formulate a coherent strategy that will maximise long-term return.

Claire Stephens