Mon 20 Feb 2023

Retrofitting, the untapped opportunity for Scottish businesses

An abandoned department store at the end of Edinburgh’s Princes Street initially looked like a demolition and rebuild project. But, with Diageo’s vision, a retrofit opportunity emerged to create a whisky adventure in the capital which is now a global visitor attraction. This retrofit provides just one example of retrofitting taking place across Scottish property, from retrofit housing to retail and leisure.

However, there is a clear omission from this trend: offices. Thinking as far back as the last 20 years, I struggle to name a single Grade A office in Scotland of any real scale that has been successfully developed through retrofitting and has subsequently stood the test of time. And yet, at a time when the purpose and use of the office is going through such significant evolution, there may be no better time for businesses and commercial property owners to reconsider the office spaces we already occupy.

A potential barrier to retrofitting offices is that new-build offices can guarantee large, even floor plates, which make it easier for the occupiers to make most efficient use of the space. Also, existing buildings will often have smaller, more irregular and quirkier floor plates, again impacting how spaces can be used. And because of different VAT treatment between new build and refurbishment, there is not an even financial playing field from a development point of view when it comes to choosing between demolition or retrofitting. However, repositioning and refurbishing existing buildings to meet the evolving needs of office spaces allows developers to reuse building materials and bring back to life historic buildings, which can in turn reduce emissions significantly when compared with a new build.

Indeed, if looking south, a drive to retrofit office spaces has been gathering momentum in London and some of England’s bigger regional centres. It has seen developers overcome some of these obstacles to retrofitting offices to modernise existing buildings while creating a lower environmental impact when compared to new build. 

For example, a former bus factory in Islington, North London, called the Busworks, was bought for £45 million last year by the office provider, Workspace. The Victorian building is now being converted into modern offices, breathing new life into the previously disused space.

Meanwhile, in central Birmingham, a major £40m retrofit is taking place to turn NatWest’s former offices into a modern workspace, whilst retaining the original frame and foundations to save embodied carbon. Because of these environmental benefits, not only might businesses seeking to improve ESG credentials look for a retrofit office, but retrofit may begin to grow in appeal to institutional property investors as well. In recent years, we have seen the emergence of the “green fund” which requires properties to meet certain standards in order to secure institutional investment. A “retrofit fund” may not be too far down the line as an evolution of these funding structures.

As Scottish businesses reconsider the purpose, impact and value of offices, might retrofitting – and its environmental benefits – play a greater part in 2023? 

This article was first published in the Herald. 

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