Repurposing Offices: Options And Challenges

Demand for office space appears to be slowing down in the post-pandemic era as remote/hybrid work gains wider acceptance and new technologies make this type of work possible—and in certain cases, even preferable to the “old ways” of working. Many industries are shifting from the “all hands on deck” approach to a more flexible environment, giving their employees options on how and where to work. Cost savings, the elimination of commuting time, and a wider choice of potential employees have also contributed to the decline in demand for office space. The role of the office is shifting, with an emphasis on representative HQs, satellite offices, and shared spaces.

By Serban Patriciu, Head of Real Estate Practice Romania at Noerr

Some developers are downplaying this trend, but even though the future of offices is not clear at this point, it is better to look for solutions than to deny the trend and hang on to the wishful thought that offices will be the same as they’ve always been.

While demand for offices in prime locations still appears to be high, second-tier office buildings could be repurposed, either entirely or partially, with new uses including residential units, retail space, hospitals, storage space, distribution centres, gyms, classrooms, and co-working spaces. The demand for new residential properties is strong on the Romanian real estate market, and prices are climbing at a rapid pace, therefore developers’ most lucrative bet seems to be converting office buildings into housing. This type of conversion, which has a long history on other European markets, requires a larger investment than other types of conversions, but has the potential to bring the highest returns.

Besides the financing required for a conversion, permitting formalities can also be a major hurdle. Zoning plans must allow conversions or be amended so as to allow them. In addition, the developer must obtain all the required permits and finalise the design phase before a building permit can even be issued. Once the works are completed, the “new” building has to be registered with the Land Book before the apartments may be sold or leased. These procedures could take several years to complete.

Some inherent technical issues must also be taken into account, as buildings may require structural modifications. Apartments need more vertical shafts for electricity, water, and plumbing than offices do. Big office spaces are difficult to convert into apartments with natural light, as most floor plans are large, and only the area near the windows receives natural light. Proper ventilation is challenging too, as windows are not usually made to be opened. Sufficient parking spaces must also be available to comply with housing requirements. Acoustic and thermal insulation must comply with rules for residential use. Infrastructure may not be developed in the area to provide residents with urban facilities. As such, repurposing an office building that is still under construction is easier and less expensive than repurposing an existing building.

On a positive note, the conversion of offices is a sustainable alternative to demolition and new build, as it saves on building materials and transportation and produces less waste.

Decisions of this kind should be taken on a case-by-case basis and be rigorously supported by in-depth prior architectural, legal, technical, and financial analysis.