OFFICE TO RESI: how to make an asset out of dead space

prptblog tackles the problem of wasted “dead” space in office to resi conversions. We took to the streets today to ask end users how developers could turn a liability into a social and financial asset.

What should this be used for?

Office-to-residential activity is up, and there has been a lot of interest in the subject. Most of the discussions to date (e.g. this report by EC Harris) have been around the viability of office to residential conversion, and suitability of floor plates. Generally people feel that you end up with lower value, low quality space than purpose-built resi.

Even if the building is suitable on the whole, there may well be dead space that is not suitable. And what should you do, for example, if the ground floor is retail (so no GPDO rights) or parts of upper floors are unsuited to resi because floorplates are too deep to allow natural light in.

The developer’s preference may be for residential, or income-producing commercial, but if this is not possible, then you may end up with a liability.

But this can’t be right. So we set about answering the question – how to make an asset out of dead space?

COOLEST OFFICES IN BRITAIN

Following on from the last post, I thought I would share this link.

The Telegraph’s selection of their favourite office interiors

BUILDINGS AND PRODUCTIVITY – the life-cycle benefit of good commercial building design

Margaret Thatcher always said she was most productive when she was slightly cold, and slightly hungry. Her working environment had a great impact on the amount that she achieved on any particular day, let alone across the full term of her premiership.

When we think of commercial development values, a number of influencing factors might spring to mind: floor area, location, market rent, market supply, service charge costs, heat and light efficiency, rates liabilities. These are all valid – but employee productivity is a factor which often gets overlooked.

Cold offices in Westminster

Around the same time as Thatcher stepped out of her slightly cold 17th century office for the last time, across the pond, Barbara Lippiatt and Stephen Weber were writing a paper on the net benefits of good office design. The premise was that since employee salaries far exceed building costs, higher-priced office designs that enhance productivity may make sense. They noted that in a 1984 study, it was found that on a square foot basis, employee salaries are about 13 times building costs. This might mean that a 13% increase in construction costs could be justified if it results in a greater than 1% increase in productivity.

CAPCO – propco with a masterplan

pretty much my only good investment so far…

I have a very small share portfolio which I have built up mainly as the result of hunches over the last few years. I dread logging on to see my portfolio – a sea of reds, from Standard Chartered and BP, to BSkyB. In property shares I have done rather better, and one in particular stands out – Capco (Capital and Counties plc).

Offspring of Liberty International (former #3 REIT in the UK which demerged a couple of years ago) Capco sacked in the tax transparent but rigid REIT structure in favour of the Propco model favoured by higher geared and development focused companies. Since then the firm has gone from strength to strength, roughly doubling its 2010 share price.

LONDON GATEWAY – a welcome investment in infrastructure from the Gulf

The DP World site, with the old refinary in the background.

Along the Essex coast near Laindon, you can see an old oil refinery, decommissioned this year. It sits amid a construction site landscape, stretching for miles. It is the site of a new port, and the soon-to-be biggest logistics park in Europe. The capital investment for this behemoth project has its origins in oil, but this is no local project. The developer is in fact DP World, the Dubai government’s port investor.

As we trailed the perimeter of this gated desert, our taxi driver told us of his friend Mike, a man who, having lost his job working in the refinery, has retrained as a lorry driver, to ride an imminent boom in haulage demand. Mike, apparently, would rather be in the refinery, and looks back fondly on his four day working week. But in deep Essex, in the longest recession seen in living memory, he must pleased that this kind of investment is going ahead. And it is some investment.

EUROPE’S LARGEST CIVIL ENGINEERING PROJECT

Heathrow to Bond Street in 26 minutes…

THE TIN HOUSE – a tin in the rough

From graffiti, to gold buyers, shipping container shops, to curry-pushers; a wander through East London and Shoreditch is a case study of a buzzing and exciting urban environment. There is a rough feel to the area, but gone are the days where the likes of brick lane could be a first stop for working class immigrants.

The area has fast become a hot spot – highly sought-after by some, but shunned by others – either way, it captures the zeitgeist. It is a place where Bengali turbans, plaid shirts, and Hermes ties come together amid expensive Victorian terraces.

So an invitation from a City lawyer to view his tin house in the heart of this eclectic urban jungle was not something I could refuse…

TOUR OF LONDON CITY: EAST

prptblog took a couple of guests on the developingcity tour of the eastern section of the City, guided by Caroline Dale.

Some highlights:

The 310 m building is the tallest in Europe. It contains offices, restaurants, a hotel, and ten 6,000 sq ft apartments. No requirement for affordable housing; their S106 was to clad PWC’s building next door.

3 MILES FROM OXFORD STREET…

Sir Terry Farrell’s latest master plan

 

…a transport super hub of national and indeed European scale and importance could readily be realised at Old Oak Common, and around it there could be developed a major new metropolitan urban development that could rightly be called Park Royal City International. – STF

Find out more on the H&F website