As the UK office market responds to hybrid working, there is an opportunity to transform empty buildings into homes – but should we take it?
Can unwanted offices become much-needed homes?
It’s an important question because there are pressures from several sides desperately looking for a ‘Yes’.
First, office building owners have faced the most significant change in occupancy levels in the last fifty years. People just aren’t doing the office 9-to-5.
The Office for National Statistics (ONS) figures for 2023 show that in January and February, 40% of working adults reported working from home at some time in the past seven days.
Although corporate leadership struggled against workers’ hybrid habits, many have now embraced the inevitable, and found the silver lining: they need less office space.
For example, in August 2023, HSBC Bank announced that it would quit its famous Canary Wharf HQ after more than twenty years at the tower. Instead, from 2027, the bank will take half the office space at new premises in the City of London.
These properties have been the backbone of many pension funds
Less is more
As other corporate tenants follow suit, they are moving towards less square meterage of office space that offers exciting facilities to encourage workers away from home for some face-to-face time.
This ‘flight to quality’ is raising rents on grade A offices, but leaving less desirable buildings out in the cold.
That creates several problems. Owners are watching property values shrink. Although it may be hard to work up sympathy for landlords, these properties have been the backbone of many of our pension funds.
In addition, we must also consider the embodied carbon of these buildings. Demolition is no longer the easy solution it was twenty years ago.
More housing needed
The second aspect of this property conundrum is housing. The UK desperately needs more of it, particularly for renters.
Although the UK’s build-to-rent sector is booming it’s still in its infancy and private housebuilders are laying down tools as their market shrinks in the face of rising mortgage rates, which means more people must rent homes.
Does the answer then lie in converting these unwanted offices into much-needed homes? Property consultant CBRE thinks so.
Their recent report says that converting vacant London offices in danger of being stranded assets could create 28,000 homes in London – just as the new homes pipeline is drying to a trickle.
The Royal Institute of Chartered Surveyors (RICS) notes that the change in office use patterns is a phenomenon also seen in the USA, where office-to-apartment conversions are underway in many cities.
RICS recognises this approach has environmental benefits: “With buildings responsible for around 40% of global carbon emissions, half of which are generated by their construction, it offers a more sustainable and circular approach than demolishing and building new.”
The UK government has already spotted office-to-residential conversion as a solution for the UK’s housing challenges. It updated the Permitted Development Rights in 2015, enabling change of use from office to residential with minimal Planning red tape.
Unfortunately, making the process easier has not always resulted in better outcomes for residents.
As any architect or building services engineer will point out, turning an office building into apartments is far from straightforward because the interior has to be massively re-organised. There are also now stringent requirements under the Building Safety Act for dwellings in the UK which could require extensive changes to an office facade and other features.
Heating and cooling
Beyond the fundamentals of safety, there are issues of heating, cooling and hot water to consider.
For example, office HVAC systems are not designed to deliver hot water at levels needed by permanent occupants.
Another problem is the potential for overheating since many offices have large proportions of glass in the façade – and cooling systems designed to work for open-plan floor space.
Under the new Part O (Overheating) dwellings must meet requirements to prevent high indoor temperatures during the UK’s increasingly hot summers.
This applies particularly in London and other major cities prone to trapping heat. Insurance company Zurich UK noted that office-to-flat conversions are at increased risk of serious overheating due to lack of appropriate ventilation.
How not to do it
Unfortunately, there are many examples of how not to do office-to-resi conversions. So many that, at one point, a RIBA president called on members to boycott working on these projects.
In 2023, Housing Today magazine made a case against Permitted Development Rights by highlighting some dire conversions where poor indoor air quality, dampness, and other issues were blighting the lives of residents.
In theory, large, centrally-located and empty buildings seem an ideal solution to meet our growing need for homes. Unfortunately, making those transformations is not easy.
With smart design and engineering it can be done – but not quickly or cheaply. And that’s where the problem lies. If the government keeps reaching for easy answers to difficult questions, then there will be problems ahead.
Although empty offices pose a problem today, poorly delivered housing leaves us with even bigger issues in ten or twenty years. The solution is either to not bother, or to set high (and enforced) standards for these conversions in terms of IAQ, indoor temperatures and energy-efficient and affordable heating.
Not ‘permitted’ development, but controlled and managed transformation.