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Content specialist in office design and build.
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Office retrofits are on the rise. In 2023, the City of London Corporation approved 17 retrofit planning applications in the Square Mile. That record-high number accounted for half of permissions across the capital.
This trend has continued into 2024, with several large commercial retrofits approved as the demand for high-quality office space continues to rise. In this article, we’ll explore the shift towards retrofitting and its benefits, plus the outlook for office space in the coming years.
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What is an office retrofit?
An office retrofit refers to the process of upgrading and repurposing existing office buildings to meet modern standards in terms of energy efficiency, functionality, and sustainability, without the need for full demolition and reconstruction. By reusing much of the original structure, retrofits allow developers to enhance office spaces while minimising environmental impact and reducing costs.
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The shift towards retrofitting
The popularity of office retrofit projects hasn’t happened by chance. There are several factors at play, not least the economic incentives. Grade A office spaces attract significantly higher rents compared to their Grade B counterparts – which explains the attraction for developers.
They also offer numerous environmental benefits. Constructing new offices has a sizeable impact on the environment, which is sidestepped with a retrofit. Moreover, retrofit commercial spaces benefit from greater energy efficiency, reducing their carbon footprint long into the future.
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Of course, there are also regulations which are forcing some developers to prioritise retrofit projects. In March 2024, Westminster City Council announced a new policy to make Westminster a ‘retrofit-first’ city. It means prioritising applications for projects that re-use at least 50% of the existing building, with a view to upgrading commercial buildings to meet modern standards.
The Minimum Energy Efficiency Standard (MEES) also plays its part. In short, developers are penalised for properties with a Performance Certificate Rating of F or G. Without improving those properties, they may not be allowed to grant new tenancies or continue existing ones. Crucially, that minimum EPC rating is rising from E to C in 2027 – and again to B in 2030.
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5 key benefits of retrofitting
We’ve discussed why retrofitting has taken off. But what sets it apart from the alternatives? Below, we’ll detail five key benefits compared to building demolition or simply leaving an office space as it is.
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1. Attracting and retaining tenants
First and foremost, an office retrofit can make commercial space much more appealing to tenants. According to Savills, demand is rising for buildings that can satisfy ESG criteria for occupiers. Since the start of 2020, 52% of office space let has had an EPC rating of A or B in Greater London and the South East region.
There are a number of reasons why tenants want sustainable office space, including lower energy bills and reputational benefits. Working in a sustainable office space can improve a brand’s environmental credibility, attracting both staff and customers.
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According to IBM, 71% of employees want to work for sustainable companies – seeing them as more attractive employers. Almost half of the people they surveyed even said they would accept a lower salary to work for environmentally friendly organisations.
Meanwhile, 60% of UK customers said they prefer brands that are sustainable, though the majority of them are sceptical about product labelling alone. Having a sustainable office is a great way to reinforce sustainability claims, adding another string to your eco-friendly bow.
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2. Operational efficiency & costs
From an operational standpoint, a commercial retrofit provides much greater energy efficiency than an outdated office space. Whether it’s wall and roof insulation, air-tight glazing or alternative energy sources, retrofitting means that office spaces are significantly cheaper to run.
Energy bills represent a significant outgoing for UK businesses. According to estimates by comparison site Bionic, large businesses fork out an eye-watering £5,116 for gas and £14,279 for electricity, on average. Retrofitting can help bring these figures down.
In the UK Green Building Council’s report, ‘Building the Case for Net Zero: Retrofitting Office Buildings’, they reference an ongoing retrofit project in Birmingham. After completing initial actions, electricity consumption was reduced from 4,800 kWh/day to 3,800 kWh/day – a saving of around 20%.
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3. Obtaining higher rents
Needless to say, retrofitting also allows landlords to maximise rental value. It makes offices more attractive from a sustainability perspective, in terms of both reputation and costs, as above.
Knight Frank found that Outstanding BREEAM certification came at a premium of 12.3% in London, compared to uncertified offices.
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However, it also improves the quality of the office space more broadly, which has a knock-on effect for its rental value. In our article on the cost of office space in London, we outline the significant price gap between Grade A and Grade B office space in different London boroughs. For example, a Grade B office in Soho typically costs around £65 to £82.50 per square foot. That rises to between £90 and £105 per square foot for Grade A space.
Similarly, in an example cited by the UK Green Building Council, rental value was more than doubled after a deep retrofit of an office in Manchester – from £12-15 to £35-37 per square foot.
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4. Reduced emissions
Better energy efficiency isn’t the only advantage to an office retrofit for sustainability. It also eliminates the carbon emissions that come from demolition and construction. There’s less demand for carbon-intensive fabrication of materials like steel and concrete. That’s on top of the 4.67 kg/m2 carbon emissions generated by building demolition.
The buildings and construction sector is the largest emitter of greenhouse gases by some distance, contributing 37% of total global emissions.
According to the UN, solutions are lacking to mitigate “embodied” carbon emissions from producing and using materials like cement, steel and aluminium. Instead, the sector has been focussed on reducing “operational” carbon emissions (from heating, lighting and cooling). Retrofitting is a way of tackling both embodied and operational carbon emissions, one office at a time.
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5. Faster Approval
With net zero targets and retrofit-first policies coming into effect, it’s becoming easier to get approval for retrofit projects – especially compared to demolition and new-build construction. That means less time and money spent on applications for developers, with quicker time to market for new commercial spaces.
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In 2024, the UK government published proposals to make it easier to retrofit historic buildings. They carried out a comprehensive review of the obstacles when retrofitting historic buildings, identifying planning as a key barrier. To overcome this, they are:
- Revising the National Planning Policy Framework to emphasise the need for historic building retrofits.
- Introducing a National Development Management Policy to bring more consistency to the planning and permissions process.
- Consulting on the greater use of local listed building consent orders, which automatically grant permission for certain improvements like double glazing following standard designs.
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Looking ahead: the outlook for office space
With the MEES threshold rising, it’s estimated that around half of London offices will need action by 2027. That leaves landlords with a choice – upgrade their assets or risk them becoming obsolete.
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In short, the market is changing for office space in London and beyond. It’s not just about environmental concerns and regulations though. According to Knight Frank, more than 40% of office leases in the capital were for buildings with an EPC rating of A or B. That’s almost double the proportion in 2017 (21%) and a continued rise from 37% in 2022.
At Oktra, we help landlords optimise their assets with bespoke retrofit solutions. Our team has a wealth of experience in London office retrofits with a comprehensive approach that takes the needs of both landlords and tenants into account.
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Get in touch
Speak to our design experts about your upcoming workplace project
020 7553 9500
info@oktra.co.uk
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