The return to the office in London is gathering pace, with popular sandwich based behavioural measure the Pret Index showing sales at 87% of pre-pandemic levels in the City of London. However, elsewhere concern is gathering as to where occupancy levels will stabilise, particularly for secondary stock and locations.
Occupiers need an office that is physically and technically capable of coping with hybrid working; that has the sustainability credentials to satisfy the Net Zero Carbon agenda; and that has the wow factor to attract employees back to a physical workspace.
The best in class can surely have cause for optimism that the current flight to quality will continue – but flagship new developments and refurbishments are not typical of the capital’s workplaces.
Looking at London’s existing office estate it can feel like the pandemic has lifted the haze, and buildings that once were accepted as just part of the scenery now seem wildly unsuitable and racing towards obsolescence.
The legal landscape is also evolving to remove some of the easier options for landlords and freeholders. Legislation is closing the net on buildings performing poorly on sustainability. From 2023 regulations will require buildings to perform at an EPC rating of E or better, removing the ability to simply tick over an old building with minimal investment for an estimated 20m sq ft that fall into this category.
In addition, the chipping away at office to residential Permitted Development Rights over the last couple of years hit a critical point on 31 July this year, when various changes included limiting the amount of space that could be converted within any qualifying building to 1,500 sq m (say 20 to 30 apartments). As a result, many of those with offices that need more fundamental repurposing/redeveloping can no longer rely on residential and will need to work harder to continue their income streams.
So there are certainly challenges – but there are also opportunities, and a range of options available to landlords who want to retain ownership but improve income.
For us, the main issues to consider are:
- Conversion/refurbishment vs demolition and rebuild: a trade-off both in terms of commercial viability and the sustainability implications of embedded carbon.
- Conversion to residential through the full planning route. In the absence of Permitted Development, what can and can’t be achieved working within the relevant policy framework?
- The mix of uses and users. A different mix of uses will be more compatible with modern work/life behaviours, but how can mixed use schemes be designed to be efficient to build, service, occupy, and futureproof?
- Opportunities to increase mass, and in particular vertical mass. Where and in what form is extra height permissible?
- The increasing prevalence of both policy and political requirements to provide affordable workspace and ways in which this can be delivered.
- Creating the right quality and quantity of amenity space.
With over 200m sq ft of office accommodation in London, every percentage point that office occupancy falls puts pressure on 2m sq ft of existing floor area. Owners at risk of falling into this bracket need to act decisively.
Over the weeks ahead we will be exploring these options and opportunities in detail and looking at examples of good practice underway. If you have anything to add, more ideas to contribute or would just like to talk further please get in touch.