COMMENT Although the occupier “flight to quality” shows no signs of slowing, it probably won’t soar high enough to restore the office market to its pre-pandemic heights.
More than 100m sq ft of office space remained vacant across the UK in 2023 – a tear-jerking figure that could become even more eye-watering come the end of this year, according to the RICS.
The dilemma for developers, property owners and local authorities is what to do with the swathes of empty offices that are eating up space across the capital and beyond.
But conversions to flexible workspace can’t be the answer for everything. Against a backdrop of reduced demand and fast-approaching energy efficiency standards, office-to-residential conversions surely make the most sense. We are, after all, seemingly no closer to solving Britain’s housing crisis.
Blueprint needed
The reality, though, is that very few people want to live in them. And who can blame them? To date, the property industry is yet to develop anything close to a best-in-class blueprint of an office-to-residential project – a scheme that anybody and everybody would be happy to call “home”. The absence of exemplar schemes – projects that are carried out to perfection and genuinely wow prospective occupiers – has understandably fuelled negative perceptions and scepticism about the viability and desirability of these schemes. Some headlines have even gone as far as likening them to “slum housing”.
So, why aren’t more landlords of ageing office stock considering serviced apartments? In so many cases, the locations of these distressed assets alone mean they tick most of the boxes for ideal short-term rental accommodation or corporate housing. And, according to Advantage Travel Partnership, business travel volumes in 2024 are set to exceed pre-pandemic levels.
Driven by an increasingly nomadic workforce, business travellers are seeking alternatives to traditional hotels that offer more space, privacy and practical amenities such as kitchens. Serviced apartments meet this need perfectly, providing a homely environment with the added benefits of hotel-like services, whether for two nights, two months or longer.
What’s more, office-to-serviced apartment conversions almost always involve long-term leases, offering landlords of older properties financial certainty while also generating yields significantly higher than those from office rentals. Local councils are keen to support the reuse of existing buildings over ground-up projects, which are resource-intensive and environmentally demanding.
The flexibility of short-term rentals allows for more adaptable amenity options during the design phase when compared to the generally more stringent requirements of long-term residential living. For example, designs can include multi-functional furniture, compact yet fully equipped kitchens and optimised storage solutions that cater to the transient nature of short-term occupants. Such space-efficient layouts can help reduce the need for more extensive plumbing, electrical reconfigurations and other requirements associated with traditional residential housing, such as residents’ parking. Furthermore, serviced apartments are different from hotels, mitigating the need for space-hungry amenities while demanding considerably less operational space and back-of-house areas. This simplifies conversions and significantly boosts return on investment.
New life for ghost offices
Not all assets will be suited, but serviced apartment conversions present a viable solution to the stubbornly persistent issue of unoccupied offices. The property sector is still evolving and adapting to a post-Covid world, which demands a level of out-of-the-box thinking and innovative solutions and, in some cases, leaps of faith. A greater willingness to experiment with concepts like office-to-serviced apartment conversions could well be key for owners of old office stock that isn’t destined to ride out the flexible workspace wave.
And with thoughtful design, strategic planning and a focus on quality, these conversions could reign supreme in the realm of adaptive reuse, revitalising ghost offices and giving underutilised buildings a new lease of life.
Philip Grace is chief development officer at Bob W
