By Brian Lavery, Managing Director, CBRE NI
We are all aware that the Covid-19 pandemic challenged the traditional office model, with UK office occupancy currently averaging just 37% compared to 60-80% occupancy in 2019.
In the years following the pandemic, many companies made the decision to downsize or redesign their offices to better suit a hybrid working environment, with many moving to more efficient spaces boasting breakout areas and green credentials.
The largest UK office market by some distance is London, which has also seen a clear flight to quality. We can learn from the London model and apply this to Belfast to see how this shift in workplace demand has raised pressing questions.
Is there simply the wrong kind of office space available? Or is it in the wrong locations?
In Belfast there is currently 1,200,000 sq ft of office space lying idle. Belfast is a small city, and it appears that low quality office stock is exacerbating the problem, creating a long-term liability for both landlords and for properties owned by the public sector.
In rough terms, repurposing 1,000,000 sq ft of unused office space in Belfast city centre could deliver an additional 900-1,000 residential units.
CBRE’s London office has joined forces with Business London to assess the problem and seek a long-term solution.
To convert unoccupied office space to much-needed residential use would seem to be entirely logical, however it is important to consider the potential challenges and costs facing landlords and developers hoping to obtain this repurposing.
The first hurdle is planning policy and political sensitivities.
CBRE NI recently assisted Titanic Quarter and Belfast Harbour Commissioners in changing the planning on Olympic House, Queens Road, from research and development office use to open office use. The process to change something which appeared very slight took approximately 18 months.
With this in mind, what would the timeline be to change office use to residential use? We currently have no flexibility within our planning system to respond adequately to changing market conditions; and this is hindering our supply of potential residential space.
In London, the GLA (Greater London Authority) published a new consultation document setting out the strategic choices for planning. This reaffirms the importance of town centres in supporting economic diversity and vibrancy. It also proposes a much more flexible approach to the mix of businesses and commercial activity in towns, city centres and high streets, so that there can be a more proactive policy approach to repurposing underused commercial space.
This will include offices and retail units being permitted for use as housing, community use or flexible workspace. This aims to ensure there are opportunities to deliver residential development in place of redundant commercial use.
In Belfast, or indeed town centres across Northern Ireland, achieving a step change in house building will require multiple levers – from faster planning decisions to implied planning, provided the final use is residential.
The second obstacle faced by developers and property owners is the actual viability assessment for either retaining property as an office or repurposing it.
It is difficult to clarify the costs and requirements associated with enhancing green standards in offices, and it is equally difficult to prove whether an office can remain profitable at the cost of the required investment.
Interpreting liability assessments can be complex due to the intricacies of financial and technical data involved, either in an improvement of space or a conversion process.
Another major barrier to property development and repurposing is growing pressure on local services, particularly water and power. These areas lie beyond a developer’s control and depend on significantly increased investment from local and national government. Without such investment, economic vitality cannot be sustained.
It is my strong belief that the release of office space into alternative uses can be supported, and that a residential-led solution most closely aligns with the strategic priorities of cities and towns to increase residential availability.
Where repurposing a building is not feasible due to unsuitable floorplates, there should also be a case for implied planning permission for demolition and redevelopment.
Hybrid working, rising sustainability expectations and shifting occupier needs have changed the nature of demand for office space. You only have to walk around the city to see which properties are being underused or becoming obsolete.
This high vacancy rate should be seen as an opportunity to rethink how we target more residential supply to properly support the local economy.