How Repositioning Helps Preserve Real Estate Value

Written by Charlotte Degoulet (JLL)

Faced with growing pressure from shareholders, employees and wider society, businesses are increasingly seeking buildings that support sustainability goals and deliver social value to their communities. 

Meanwhile, if cities are to meet net zero targets in the coming years, the volume of retrofit projects will need to triple, according to JLL.

More than ever, tenants are attracted to buildings with a roadmap for decarbonisation, spaces that are flexible and efficient, and those that contribute to wellbeing and their local communities. Assets that don’t fit this bill risk higher vacancies and a ‘brown discount’ on rental yields.

Repositioning a building by re-evaluating its use class and considering how it can better serve people, can unlock significant value and create a more resilient asset.

Here’s how:

1) Lower risk by diversifying tenant profiles

Introducing new uses into a building enables a more diverse mix of tenants, reducing reliance on one market and creating opportunities to tap into booming sectors with high demand for real estate. 

In cities such as London that are drawing life sciences companies away from suburban centres, we see office towers repositioned to support laboratory use and new projects zoned for labs and corporates. 

In places with a housing shortage, residential use is being introduced into commercial properties, while an increase in remote work and online shopping has seen city centre developments include space for data centres as well as logistics hubs. 

2) Regenerate spaces by widening use

In many office buildings, the ground floor is becoming a vital space for integration with local communities. Repositioned projects might add public amenities such as bike parking, shops and restaurants, or turn unused space into green zones that benefit both building users and the wider public. 

Reimagining how a space could be used can bring people and businesses into under-utilised buildings, creating new value for communities and contributing to regeneration. 
 
Take the redevelopment of a 20-year-old, 45,000sqm corporate building outside Paris, for example. Our analysis of local neighbourhoods and their needs shaped the strategy to reposition the asset for housing, coliving and public use, alongside offices. Plans for the complex include sharing outdoor spaces and integrating renewable energy supplies.

3) Support environmental targets

With buildings accounting for more than 60% of carbon emissions in cities, metropolitan governments are increasing pressure on investors and landlords to improve real estate impact. Repositioning can help meet these environmental targets through tailored criteria for holistically improving an asset. 

Several dimensions must be considered to minimise the carbon footprint of a redevelopment; choosing the right materials; recycling others and minimising construction waste. Efficient building systems, renewable energy sources and use of biodiversity can all help reduce future carbon emissions, while resilience towards climate hazards is a key factor in delivering long lasting value. 

Our repositioning strategy for an office project in Luxembourg utilised its location between two nature centres. We not only improved use of the building’s outdoor space, boosting users’ wellbeing, but called for investment into local biodiversity, supporting investors’ sustainability targets while enhancing the surroundings for residents.

4) Create a flexible, resilient asset

Investors ultimately want to attract and retain tenants over the long term. Repositioning a building not only enables asset owners to meet the needs of today’s businesses, but also construct a space that’s more easily upgraded to accommodate future requirements. 

The challenge is in finding equilibrium between market trends, users’ expectations and financial constraints, as well as overcoming the technical hurdles of sustainably redeveloping a space with future flexibility in mind. On top of that, while municipal authorities typically support projects that add social value, there are legislative and technical requirements when changing building use. 

That’s where the benefit of expertise comes into play. Our teams help landlords and investors plan and execute sustainable repositioning projects, with insight-driven value creation strategies that streamline legislative complexities and support the vision of local authorities. 

One such repositioning strategy currently underway in Madrid, features a site originally dedicated to hotel and retail use. By combining our understanding of urban evolution and trends, with market and technical knowledge, we proposed transforming part of the existing hotel into alternative residential facilities and offices, securing long term return on investment.

Multiple-use space is the future

What people expect from buildings is changing. High density of use is now a critical element in redevelopment and we’re seeing single-use spaces like office towers give way to mixed-use, multi-functional spaces, with services for building users and the public alike.

Real estate that is flexible, sustainable and beneficial to communities will increasingly draw demand – and landlords and investors who invest in repositioning their buildings stand to generate financial, environmental and social value.

_

This article originally appeared on JLL.co.uk