News & Features

Repurposing of Commercial Property Space

Commercial space, predominantly retail and office, is going through a seismic change not experienced in decades. Office space, as one of the biggest subsectors of commercial property, will no doubt see falling demand and property values as UK office workers remain working from home. 

Over the last 20 or 30 years, office buildings have become more densely packed, taller and expensive to operate. Suddenly almost overnight this demand inevitably reversed, particularly with the need to social distance. The usability of tall office blocks, will become problematic.  Take The Shard in London, a 95 storey skyscraper for example.  The building even with its 44 lifts, will become time consuming for users to get access to the upper floors, if the capacity of each lift is halved. When this issue is extrapolated across all office buildings, one can understand an increase in desire of staff not to be in the office 5 days a week.  

To combat the issue of too many staff in the office, businesses will need to bring in more measures, partitioning and one-way circuits, reduce capacity in communal areas of the each building, all of which come at a cost.  As a consequence, companies will, either through necessity or design, see opportunities to save on these operating costs by reducing the total office space required. Notwithstanding this, businesses still need to see the current workspace remaining fit for purpose. Investment in technology and the underlying infrastructure within a building will be a prerequisite. The workforce of today and how we operate will inevitably be different in the future.

The retail sector is equally faced with similar dilemmas. Retailers will need to rethink their physical space requirements in light of changing shopping habits which has been exasperated even further by COVID. The recent collapse into administration of the Arcadia Group with its 444 stores in the UK, and a multitude of other retailers posting huge losses, will only enhance the issue with more and more retail space becoming available. 

Will re-purposing of commercial space become the norm?  Inevitably, yes.  It is well documented the UK-wide housing shortage.  Radical reforms to the planning system by the Government to allow vacant buildings in town centres to be converted to housing will speed up those conversions. Under the new rules introduced in September, existing commercial properties can be converted into residential housing more easily.  This is seen as a move to energise the construction industry and speed up rebuilding.  Although the changes will be seen as controversial, the reforms to England’s seven-decade old planning system will introduce a new approach that arguably will work for our economy and society.

As a consequence of the changes, landlords and investors will be progressively minded to consider the long-term future of their office assets. This will be particularly so for secondary grade offices, where rental growth has stagnated over the past few years, and which are now arguably exposed to accelerated structural change in occupier demand in the wake of COVID-19.

The real estate sector faces some significant challenges as a result of COVID-19, simply because of its exposure to almost every other industry that has proved vulnerable to the pandemic. On the positive side, I think there will be opportunities as some prime retail sites will become available, either for occupational tenants or for potential redevelopment. Local authorities should grasp the opportunity presented and look to play a key role in the repurposing of the High Street to ensure town centres remain attractive and useful spaces for the community.

Also builders will no longer need a normal planning application to demolish and rebuild vacant and redundant residential and commercial buildings if they are rebuilt as homes.

More types of commercial premises will be able to be repurposed without planning.

Paul Palmer, TDA Head of Assets & Facilities Management