The future of commercial buildings in an age of remote working
August 21, 2020 By Anthony Broatch
Overview
This article is targeted at building owners, property managers, and development managers and gives insight into possible solutions for the increasing number of unoccupied commercial buildings in Aotearoa. The solutions involve re-purposing these buildings to continue making a profit and become more resilient to future changes.
The Issues We are Facing
Reduced Demand For Current Commercial Buildings
The need for businesses to own large office spaces is diminishing due to the rapid uptake of remote working, caused by COVID-19, and downsizing which will be further reinforced by an imminent recession.
Due to this, owners of less desirable commercial office buildings will soon be finding their building unoccupied, if not already, due to lack of demand if no action is taken now.
The Urban Development Institute of New Zealand (UDINZ) has stated that vacancy rates in B and C grade buildings were already over 15 per cent prior to COVID-19. With the construction of new A grade commercial buildings such as the PWC towers in Auckland city, we can expect vacancy rates to increase even further.
Although we are moving into an age of remote working being the new norm, we are only at the beginning of this society shift. A Global Workplace Analytics study in America states that “56% of employees have a job where at least some of what they do could be done remotely”, however in 2018 only “3.6% of the workforce works remotely half time or more”.
Global Workplace Analytics also predicts that post COVID-19 “we will see 25-30% of the workforce working at home on a multiple-days-a-week basis by the end of 2021”
The net result will mean a significant drop in the need for central office space in the next few years. We are at the edge of a rapid turning point in the way people work and live and have the opportunity to reshape the built environment in Aotearoa for the better.
Housing Issues
For all the negative aspects that have come with COVID-19, it has also given us an opportunity to ease the housing crisis by converting existing unused commercial buildings into new accommodation. The new Healthy Homes Standards will mean we will be seeing a large number of current rentals up for sale which will further increase the demand for suitable housing.
In addition, we could see a large population increase in the coming years putting further pressure on the housing market. This would be due the large number of New Zealanders coming back into the country and further immigration predicted both from people looking for a safe haven from COVID-19 and other overseas political issues.
Community and Social
There are a large number of community and social issues caused by the way we currently live. We live dense communities however we are often more disconnected from our community than we would be in a smaller town. The shift to working from home will result in people spending more time in their local communities and, due to reduced commuting, they will also have more time with whanau and more time to spend on their hobbies and other activities.
The decreasing demand for commercial office buildings in the city, discussed above, will provide the opportunity for these buildings to be converted into residential or mixed-use buildings.
Auckland city council and other regional councils have plans to create more green and attractive spaces in our cities which will draw more people to these urban centres. With so many exciting development ideas being circulated, these cities and others will become an even more attractive place to live. With the water views, hills and mountains Auckland has the potential to become one of the most beautiful cities in the world.
Sustainability
Repurposing existing buildings, as proposed above, as opposed to demolishing and rebuilding is a more sustainable option.
Creating more central accommodation, in addition to people working from home, will reduce traffic on our roads and therefore the overall air pollution. This would benefit the environment as well as New Zealand’s clean green image. This drop in traffic will also reduce the investment required to upgrade roads, freeing up that money to be spent on more sustainable initiatives that better benefit society and the environment.
The Solutions
The viable options for untenanted building are limited and very few offer any long term security as an investment given the issues raised above.
Some current options are as follows:
Repurposing your existing building: Options such as mixed-use buildings and vertical communities are likely your best option as they provide you with an opportunity to diversify to be more resilient to change. This resilience comes from your income not being reliant on a single type of building use.
Demolishing and repurposing the site: This may be a good option however it’s not particularly sustainable and requires the largest up front investment.
Renovating the existing building for the same use: This is costly and does not provide any protection to the future changes described above.
Reducing rent: Not only does this reduce income however it risks devaluing the building therefore is not an ideal short or long term solution. There are also often additional risks with tenants looking for the lowest possible rent without considering the building quality.
Repurposing your existing buildings into mixed-use or other alternative models is not a new idea and has already had great success overseas.
Get in touch with us today if you would like to learn more about how you can re-purpose or renovate your existing building.
The Logistics
For building owners
There are a number of steps you need to take prior to embarking on converting an existing building into mixed-use model buildings, vertical communities and other alternative models such as co-living.
1. Decide on the most suitable reuse of your building and/or engage an experienced architect to produce concepts. We work with several experienced Architects that we can help you with these concepts.
2. Look into potential grants for the type of development you are looking at.
3. Investigate potential sustainability design options to make the building more attractive and further future-proof it from potential legislation changes. There are a number of options which we can look at to achieve your sustainability goals.
4. Undertake a building assessment. Knowing what work is actually required will save you a lot of money in the long run and allow you to clarify budgets. We can help you with these assessments. This would involve:
Reviewing current structural performance against requirements for your redevelopment.
Assessing the building services upgrades required to meet the new building needs.
Reviewing the fire-rating performance
5. Engage a planner to identify any additional council requirements for your development such as rezoning.
6. Once the extent of required upgrade work is established, engage a quantity surveyor should be engaged to provide you with accurate budgets. We work with several experienced quantity surveyors that we can help you determine accurate costing.
For more information on the above get in touch and we can help and also connect you with the right experts to complete your project.
Costs
For building owners
Once you have gone through the logistics above and confirmed costs, finding capital investment, if you can’t fund the project personally, is the next step.
Many people in the world see New Zealand as a stable safe haven and would be happy to fund good investment projects. In order to secure funding, clear project costs and a ROI will need to be established.
For business Owners
For business owners there are significant cost savings to be realised from allowing remote workers. This is obviously not as simple as just allowing people to just start working from home, especially in more traditional types of businesses that are used to structured office environments. To enable this, businesses must really understand what motivates each employee and set clear criteria for performance. However when it works it can be the most beneficial solution for everyone in the business.
From a Global Workplace Analytics study, “a typical employer can save an average of $11,000 per half-time telecommuter per year. The primary savings are the result of increased productivity, lower real estate costs, reduced absenteeism and turnover, and better disaster preparedness.”
Conclusion
We are only at the beginning of a large change in how we live and work. This change will see more people working from home and, with improved technology and online shopping, there will be less of a need to spend time traveling. This will make people more productive, reducing the environmental impact from travel, and reducing the need for large commercial office buildings.
Now is the time to be looking at converting older commercial office buildings that are either currently untenanted, or will be in the near future. New mixed-use model buildings, vertical communities, and other alternative models have a higher likelihood to be more robust, forward thinking, and sustainable investments over the building’s life.
Get in touch with us today if you would like to learn more about how you can re-purpose or renovate your existing building.
Further Reading
If you’re also interesting in learning more about going carbon zero or how to reduce virus transmission within buildings check out our articles below.
