Are a significant number of office buildings about to become redundant?

Sustainability has become one of the most important search criteria for businesses looking for new premises across London. However reports suggest that a significant proportion of London offices could become unusable when new standards on energy efficiency are implemented in 2023. The new Minimum Energy Efficiency Standards (MEES) state that “it will be an offence to continue to let commercial property with an Energy Performance Certificate (EPC) rating below E.”

In London currently, almost 10%, 20million sq. ft, of the building stock has an EPC rating of F or G and will become unusable once the MEES standards are introduced. With most of London’s building stock being well below these targets there is a growing need for buildings to undergo refurbishment and upgrade their energy performance to ensure they meet new standards and avoid becoming obsolete, unable to attract new tenants.

Sustainability is the key to survival in a competitive market.

London is the world leader when it comes to low carbon office development, with close to 3,000 green-certified buildings, but analysis from Colliers shows that only around 20% of central London offices come with an A or B EPC rating. This is not enough to satisfy the emerging demand. As businesses look to attract and retain employees by occupying the most sustainable spaces, with the best working conditions and most extensive amenity offers, there will be a drive for high-quality refurbished spaces that can fill the gap between supply and demand.

It is widely accepted that the capital’s workplaces will be less busy now than they were before the pandemic. There has been a noticeable shift in how we work and prioritise aspects of our lives. Companies continue to adopt hybrid working practices with employees not expected to work in the office 5 days a week. Estimates anticipate there will be around 10% fewer people in office buildings daily.

Contrary to initial expectations, businesses are still searching for London office space, with the focus now on quality not quantity. The office is evolving – with the demand for higher quality space that can fulfil the requirements of a hybrid workforce growing. Workplaces need to be more attractive, offering staff more than they’re getting at home, encouraging them to undertake the daily commute and sacrifice some of the flexibility discovered while working remotely.

The availability of commercial floor space in central London has increased considerably during the pandemic.

As the market prioritises Environmental, Social and Governance (ESG) principles and employee well-being, much of this vacant space is unlikely to be filled. Including staff in the decision-making process for their work environments could encourage them to return. Trusting employees with decisions relating to their work environment gives a greater sense of ownership, making them feel more comfortable and valued when planning change. We successfully adopted this approach with Network Rail in their move to flexible working at the Baskerville House site in Birmingham working closely with different user groups to align changing needs.

Spaces that achieve the new environmental standards and value staff’s well-being will be in the highest demand, and able to command the greatest values. Those which are unable to compete will become stranded assets.

One of the issues with the construction industry is the huge amounts of waste generated. Refurbishment projects go some way to address this through the circular economy of materials removed as part of the process.

At our Baskerville House project for Network Rail, one of the focuses was to work within the existing building in such a way that minimised reinstatement works and wastage at the end of the tenancy.

Furniture was designed to not be site specific so it could be reused at another future location. By promoting the ability to reinstate materials, fittings and furniture in an alternative location we prioritise their future use instead of defaulting to recycling, where large amounts of energy can be required to make material useable again. This approach highlights that re-use over the creation of something new is not difficult to incorporate in design.

While the new build, highly sustainable developments rightly demand the highest rental levels, sympathetic refurbishments have a crucial role to play in providing tenants with an environmentally friendly option, without the premium price tag.

Refurbishing the existing stock is one of the most cost-efficient ways of creating high quality, sustainable office space. With the retention of structures, careful selection of new materials and modern construction techniques the embodied carbon of a refurbishment project represents a significant saving when compared with its new build counterpart.

Depending on the level of refurbishment desired, there can be significant cost savings. Reduced build-times, and planning timeframes are significant positives when considering how quickly spaces can be offered to the market. This area of the market is underutilised and offers a real opportunity to quickly add value and increase the amount of sustainable space available.

It is important to recognise the value in an existing building’s character and location, elements that new builds struggle to replicate. Our own London office was a former photographic studio and before that a 19th Century warehouse, located within the Valentine Place Conservation Area in Southwark. In refurbishing the building we celebrated its historic features, while improving the working environment through the introduction of modern technology. These interventions have added to both the building’s financial and social value.

The growing recognition of the environmental situation, the importance of sustainability and focus on the health and well-being of staff, means businesses are placing greater value in the quality of their workplace. As companies prioritise quality over quantity, the demand for high quality sustainable space is at its peak.

Refurbishing and modernising spaces to align with, or exceed, upcoming standards presents an opportunity to respond to the changing working environment. The focus on integrating flexible spaces, working practices and understanding staff well-being provides further impetus to update our existing building stock.

The imminent changes to EPC standards and the growing need to compete with the home office, means existing spaces that no longer meet these expectations will struggle to survive. Our offices need to adapt to the shift in environmental awareness and working practices over the past 18 months, providing spaces that place greater emphasis on amenities, well-being and wider global impact.

With the huge amount of space in London that currently needs to be upgraded building owners have the opportunity to achieve these targets quicker, and at a lower cost both financially and environmentally through refurbishment.