Maybe it’s time for office landlords to go home

The rise of remote working has dented demand for office space, but if landlords repurposed their buildings to provide good quality homes, they could tackle two problems in one go, writes Ben Pettitt

Following the rise of remote working in recent years, many employers are now incentivising staff to return to the office. But it seems that empty offices are continuing to cause landlords a headache; in fact, the third quarter of 2023 saw London vacancies reach 20-year highs.

Meanwhile, McKinsey estimates that remote work could reduce the value of office buildings in major cities by $800bn over in the US – impacting the pockets of building owners in turn.

With hybrid working patterns offering better work-life balance, and almost two-thirds of workers desiring to work completely remotely, declining demand for office space doesn’t seem likely to slow.

As such, building owners face increasing challenges when it comes to protecting the longevity of their office estate income.

One sector’s challenge, another’s solution?

One solution to the office space conundrum could also help to solve the pressing challenges in the housing sector.

Just as employers innovated throughout the pandemic, landlords now face an opportunity to reimagine the potential of their property and meet future tenant requirements. By converting vacant offices into homes for sale or rent, building owners can make a positive intervention to help address chronic housing shortages.

For example, CBRE estimates that vacant London office space could be used to help deliver a significant 28,000 homes.

By making vacant office buildings ‘better’, landlords can create sustainable homes or healthy mixed-use living spaces that attract the tenants of tomorrow. By reshaping the future of their redundant commercial buildings, owners can also help tackle wider environmental and social challenges while future-proofing their income.

Leveraging technology to unlock low-carbon living

The premise is simple: Repurposing buildings can be a more environmentally friendly option than creating new ones. This is set to be an increasingly important strategy – a significant 80% of buildings that will be occupied in 2050 already exist.

Retrofitting, rebuilding, or renovation can be effective solutions for creating thriving living spaces in a more sustainable way. And with embodied carbon expected to account for around 50% of built environment emissions by 2035, repurposing helps avoid high levels of embodied carbon being emitted through demolition. It also limits the need for carbon-intensive materials that would be required for rebuilding.

But when it comes to repurposing existing office space to unlock the new homes of the future, balancing comfort, carbon, and cost will be key.

Prioritising decarbonisation

In a world where extreme weather is becoming concerningly commonplace, there is an increasing emphasis on future-proofing buildings against adverse conditions. And with policy prioritising decarbonisation to support the race to net-zero, building owners also need to meet growing levels of regulation.

Typically, when a new building or refurbishment is designed, various forms of digital modelling technologies are deployed, supporting the design process, optimisation of building energy efficiency, and achieving regulatory compliance with energy performance certificates (EPCs).

However, there is a significant opportunity to redeploy these models when repurposing office space and beyond, throughout the building’s entire lifecycle. By awakening a ‘Sleeping Digital Twin’ – that is, utilising a pre-existing 3D design, energy compliance, or BIM model for whole-life building performance modelling – landlords can leverage existing models to support future building design decisions, and create decarbonisation roadmaps to ensure buildings achieve their net-zero carbon targets.

Through identifying opportunities, from low-cost operational measures to shallow and deep retrofit options – such as building fabric, electrification of heating and cooling, on-site renewables, and EV charging infrastructure – digital twins can provide useful intelligence in real-time, as well as help map out the building’s longer-term route to reaching net-zero.

Utilising robust data, analytics technology, and actionable intelligence enables building owners to make the right decisions at the right times about their building to decarbonise.

Controlling costs

The last few years have seen consumer purse strings tighten, and many businesses forced to compromise on profit; rising energy prices will continue to create an impact.

In this economic climate, utilising digital twins to understand how their office building currently – and could – operate can equip building owners with the intel to make informed decisions about their built assets and portfolios.

Looking at a range of potential ‘what if’ scenarios, testing impact, and sequencing the implementation of decarbonisation interventions can help landlords reduce financial, climate, and regulatory risk exposure, and enhance their confidence in property upgrade financial planning and investments.

Looking ahead, from a commercial perspective, optimising efficiency can also help landlords to protect property value. The industry is already seeing increasing demand for low carbon buildings, and CBRE reported that energy-efficient commercial property assets saw stronger investment performance between Q1 2021 and Q2 2023.

Making smart changes now will mean landlords are primed to create buildings fit for the future, meeting the longer-term needs and demands of both tenants and shareholders.

Creating occupier comfort

BRE Group estimates that poor housing costs the NHS a significant £1.4bn a year to treat people affected.

Repurposing office space into sustainable new homes can also benefit the health and well-being of residents, ensuring indoor environmental quality and living environments are meeting optimal comfort levels.

Being able to offer optimum occupant comfort and well-being in both the residential and commercial sectors will play a key role in appealing to businesses going forward.

Some landlords may choose to transform empty office buildings into a mixed-use space. This might include retaining some office space, while retrofitting other parts of the building for residential or retail purposes.

As offices are often situated in urban centres, converting buildings into these spaces can help promote the sustainable ‘15-minute cities’ concept.

With a host of amenities already on the building’s doorstep, and the renovation adding to this, homes in the heart of the city offer residents the opportunity to walk, cycle, or increase use of public transport. This brings health benefits, as well as helping to reduce polluting traffic from the streets.

Making the most of existing office estate

With shifting approaches to work posing challenges to office landlords, and limited housing stock impacting society, therein lies an opportunity to address the challenges faced across both the commercial and residential sectors.

Utilising existing technology, building owners can equip themselves with the intel to make educated decisions about their office estate and create the sustainable homes of tomorrow.

Main image: Ben Pettitt is sector lead for real estate at global climate tech company, IES

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