The signs of change in commercial property are increasingly visible on the ground. They can be seen in office buildings being reconsidered for housing and other uses, former department stores being repurposed, and high streets where landlords and occupiers are having to think differently about what brings people through the door.
None of this is to say that demand has disappeared. The office market, in particular, is more complicated than that. The COVID-19 pandemic shift to hybrid working had an obvious impact on demand for office space, and that effect is still being worked through. But it has not affected every part of the market in the same way.
Demand for Grade A office space and energy-efficient premises has improved significantly. In this part of the market, demand has recovered close to pre-pandemic levels. Businesses may not use offices in exactly the same way as they did before the pandemic, but many still want high-quality space that supports staff, clients and the wider operation of the business.
The more difficult position is in the secondary office market. Older buildings, which are more costly to maintain and less energy efficient , are still struggling to recover. The post-pandemic shift to hybrid working is likely to have a longer-term impact on these premises, particularly for landlords whose portfolios are built around secondary office spaces and for smaller businesses occupying those premises.
For landlords in that position, this is not simply about waiting for the market to return to what it was. In some cases, it may not. Instead, there appears to be a trend for buildings that once worked well in the secondary office market being improved, reconfigured or repurposed entirely. The question for each owner is whether the best long-term return still comes from office use, or whether there is a stronger case for doing something different.
That does not mean every secondary office will need to be repurposed, and nor should repurposing be seen as a simple answer. Planning costs, market demand, location and the physical nature of a building will all shape what is possible. But landlords who own older office stock need to understand their options early, rather than only reacting when demand weakens further.
The same principle applies to town centres. The decline of the traditional retail landscape has been visible for some time, and it cannot be explained solely by the pandemic. Anyone walking down a typical high street can see the pressure that has built up over many years.
From a commercial property perspective, one of the biggest issues for small businesses on high streets remains business rates. Many small retailers and operators are looking for that burden to be re-evaluated so that occupation becomes more sustainable. Alongside that, town centres need investment and a clearer sense of purpose if they are to attract people back.
That purpose is increasingly likely to be mixed use and experience-led. People need a reason to come offline and visit a town or city centre, rather than doing what they need to do from home. That is one of the reasons we are seeing former retail space being considered for different uses, including leisure, hospitality, housing and other forms of occupation.
Cardiff provides a clear example. Part of St David’s Cardiff shopping centre is being repurposed following the departure of Debenhams, with more experience-led uses being discussed for that space. That kind of approach recognises that large retail units may need to serve a different function in future.
For landlords, the appetite for change will vary. Larger property owners and developers may see the value in investing now to protect long-term returns. Smaller landlords may look instead at alternative uses or an exit from parts of the market. Both approaches can be rational, depending on the building, the location and the owner’s wider position.
What is clear is that doing nothing is rarely a strategy. Landlords who are considering redevelopment, repurposing or disposal should speak to agents and solicitors early. They need to understand what can be done, what planning issues may arise and what the commercial options really look like before making decisions that could shape the asset for years.
Mathew Clapham discusses commercial property in the Legal Insights podcast. Listen here:
