All change as offices undergo a radical transformation

Office assets are undergoing a transformation that requires investors to plan carefully, experts agreed at Real Asset Media’s The Future of Office investment briefing, which was held online on the REALX.Global Platform recently.

“We’re undergoing the biggest change in working patterns since the Industrial Revolution,” said Eva Seeber, executive director, asset management corporates, Swiss Life Asset Managers. “Technology is transforming every sector and virtual reality is coming to real life really fast.”

Eva Seeber.

Navigating change means getting to grips with technology but also dealing with the biggest challenge of all, which is sustainability.

“It is the perfect storm,” said Andreas Stegmann, head of commercial real estate investment international, Corestate Capital Group. “You really have to think and act on multiple fronts, otherwise you are at risk of having stranded assets going forward.”

What makes it even more complex is working on city quarters rather than individual buildings, repositioning entire areas and using the mixed-use concept to integrate everything and create a new dynamism in cities, he said. 

As ESG issues come to the fore and the 2050 deadline for zero emissions gets closer, the pressure on investors and developers will increase and lead to a lot of stranded assets.

“Investors won’t buy and tenants won’t rent anything that can’t be turned green,” said Assem El Alami, head of international real estate finance, Berlin Hyp. “But I am optimistic that technology will make progress, so that new solutions will be found for assets that now would be stranded.”

Until technology comes to the rescue, it will be up to owners to assess the state of a building and the cost of upgrading it which is not an easy process.

Many owners unaware of costs required to meet energy standards

“We do an energy analysis of all our buildings and we know when they will no longer be compliant, we have tangible data and can plan the cost of intervention when the asset is no longer competitive,” said Stegmann. “But today many owners are not aware of the costs they will incur to get their offices up to standard.”

It is a substantial investment in time and money but it is worth it, said Jake Jephcott, chief development officer, Olivia Business Centre: “There’s a lot of capex involved and a lot of consultation. It hasn’t been plain sailing, but it has put us in a good position and now we’re getting the payback.”

Even during the pandemic people came to the Olivia Business Centre in Gdansk because it was a good and safe place to be and to meet others, he said.

“ESG is a challenge but also an opportunity to make a huge difference,” said El Alami. “We on the banking side promote ESG compliance and we were front-runners, issuing more green bonds than any other private institution in Europe. Now national regulations and EU taxonomy are also pushing banks to be ESG-compliant.”

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