Meeting the Commercial Property Retrofit Challenge
Part 3: Future-proofing, Practicalities & Possibilities
3 minutes to read
You can find the full report here, but for the quick take and a guide of where to find the information in the report see below.
This is the third and final part of our series: Meeting the Commercial Retrofit Challenge. In Part 1 and Part 2 we covered the key questions, costs, and benefits of retrofitting and refurbishing. Now, in this final instalment, we tie it all together – adding in the final considerations and the need to act sooner rather than later and touch on the final “re”: repurposing, whether through new uses or redevelopment
Key Takeaways
£2.8bn value-add investment
Momentum has been and continues to build for value- add strategies, with early-mover advantages in sight. In 2024, 45% of London office investments focused on value-add opportunities, according to Knight Frank data. Across the UK, excluding London, £991m was spent on office investments for redevelopment and £915m on industrial, according to RCA. More on page 3.
40% fall in approved planning applications
Planning approvals for office refurbishments have hit a six- year low, from 500 in 2019 to under 200 in 2024, although partly explained by falling approval rates (see page 4). Beyond planning challenges, project timelines can span multiple years, and supply shortages are intensifying, creating an opportunity. London faces a 7.6 million sq ft shortfall of new and refurbished office space, and 40% of office markets outside of the capital are ‘under-supplied’ for Grade A spaces (page 3). Aligning ESG compliance with market cycles can unlock liquidity.
3 years for comprehensive refurbishment
The timing of retrofitting, refurbishing, or repositioning projects is critical. Comprehensive refurbishment projects under 100,000 sq ft can take two to three years, with larger ones taking up to four years, as we explore on page 5. Early planning is vital to maximise opportunities, while lighter-touch interventions may save time but require swift action.
£2.7bn in annual rent to future-proof
Strategically aligning projects with lease expiries can unlock significant opportunities. With 56% of leases on offices rated EPC C or below, equating to 33m sq ft in London and 5.5 million sq ft across major cities, expiring by 2030, this is a prime chance to upgrade and secure £2.7 billion in annual office rent (page 6). Early planning could help avoid vacancies, mitigate potential rising labour costs, and ensure smoother execution (page 7).
19 percentage point value uplift
Assessing the potential investment return from retrofitting or refurbishing will play a role in determining the appropriate approach. Our analysis of London office retrofit or refurbishment projects, which improved EPC ratings from C and below to B and above, revealed that the average capital value gap relative to prime values narrowed by 19 percentage points (see page 8).
10.6m sq ft repurposing potential for London offices
When retrofit or refurbishment isn’t viable, repurposing offers opportunities. Since 2015, 77 million sq ft of office space in England has been converted to residential use. We identify 10.6 million sq ft, or 4% of the total office space, in London, meeting specific criteria, meaning it could have repurposing potential. See pages 12 and 14 for ESG and residential insights and page 11 for redevelopment ESG considerations.