I suppose we shouldn’t be that surprised…after all, Cinderella turned a pumpkin into a coach, and Elon Musk turned a (relatively) thriving business into a basket case. But outside the world of fairy tale folk, real-world transformations are happening, and for the best current example, look no further than those tired old, inner city office blocks: often with exterior panelling sliding loose, darkened windows scarred by graffiti and litter swirling in the wind round walkways still doing their best to look like thoroughfares. Nobody loves them anymore, so the blocks stand mutely waiting for a demolition team to put them out of our misery.
Well, I want to be straight with you: That’s not altogether true. Some of those old office blocks are now embracing a brighter future.
According to figures released recently by CoStar, a leading commercial property analyst (https://costar.co.uk/), 25% of last year’s office block sales were made to developers, all of them planning to convert these sleepy old office blocks into state of the art hotels.
Striking as it sounds, that finding shouldn’t come as a surprise to anyone. In essence, it simply tracks a more profound change in commercial property markets as a whole. After two years of COVID lockdowns, more and more employees are now working from home (on a full-time or part-time basis), which means demand for an old-fashioned office block has more or less fallen off the cliff. For many employees, their office is now the kitchen and the “block” bit becomes superfluous.
Then factor in a slew of necessary but increasingly stringent net zero targets (https://ww3.rics.org/), which have progressively reduced demand for aging inner city stock to an all-time low, and you’ve got a potent double whammy for change: fewer and fewer want to work in an office block, and fewer want to buy one. So, radical change is pretty much the only available option…that, or die out altogether.
That’s why property developers are increasingly voting, with their wallets, for change in this complex sector…change rather than extinction.
Take, for example, the Post Office Tower (or BT Tower for younger readers): Grade II listed it might be (in fact it is), but the Tower is essentially an old office block and currently finds itself in the wrong place (Central London) at the wrong time (post COVID and post decarbonisation): so now it’s being scoped up for redevelopment as a Hotel, as part of a £275 Million project run by MCR Hotels. And in December last year, Haymarket House, in London’s Leicester Square, was sold for redevelopment as a £400 Million Hotel, marking a dramatic shift away from its previous zoning as office premises (again, wrong place, wrong time).
The Corporation of London also added a new catalyst to the mix by recently announcing a relaxed code for favoured development projects (including, of course, hotel construction and refurbishment). According to CoStar, these relaxations have “helped to accelerate deal types and increase appetite from investors and operators to develop in the sector”. They’re probably right about that…
But on any basis, given the UK aggregate of office block to hotel conversions rose by £386 Million in 2023, it's certainly not a trend we can afford to ignore.
Red Ribbon Phoenix Green Hotel Fund (www.redribbon.gi/phoenix-green-hotel)
The Red Ribbon Phoenix Green Hotel Fund targets legacy developments and refurbishment opportunities to secure conversion of existing buildings (such as office blocks) into hotels: creating facilities capable of being repositioned as certified carbon neutral in prime locations across the UK (including London).
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Red Ribbon Asset Management (www.redribbon.co) aims to harness the full potential of fast evolving and emerging technologies to meet the needs of global communities as part of a circular economy, fully recognising the compelling demands of planet people and profit.
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