Newsletter_Q2_2018_UK

Newsletter Q2 2018

” Access to efficient infrastructure seems to be one of the key drivers of current and future demand for commercial property.

direct motorway access, while at the same time offering an up-to-date building stock or the possibi- lity of constructing built-to-suit facilities. Logistics businesses continue to prefer a location in the south corridor, stretching between Høje-Taastrup and Køge, or the west corridor towards Roskilde. For businesses in the storage and logistics segment, the focus will be on commercial districts with direct motorway access, while at the same time offering an up-to-date building stock or the possibility of constructing built-to-suit facilities. Logistics busi- nesses continue to prefer a location in the south corridor, stretching between Høje-Taastrup and Køge, or the west corridor towards Roskilde. Given the higher corporate demands for infrastruc- ture accessibility as well as demands for up-to- date and space-efficient buildings, we expect to see further market polarisation, with poorly located districts characterised by an outdated building stock facing a sharp increase in vacancy rates and dilapi- dation. As a result, these areas will be in great need of revitalisation or redevelopment, but a number of barriers may slow down the redevelopment process. The greatest barrier for redevelopment or revitali- sation is the financial aspect, as even worn-down production and storage facilities may have a market Redevelopment of existing commercial districts

value exceeding the value of office building rights, even when allowing for vacancy and refurbishment. In addition, the business case in connection with the refurbishment and upgrade of old office properties may also be a challenge as the investment is only rarely recoverable due to the low rent potential in the area and sustained high vacancy risk on re-let- ting. As a result, residential conversion may be a viable option in many commercial districts as prices in the housing market to a higher extent support rede- velopment projects that involve the demolition of existing build-ings. When converting for residential use, however, existing businesses need to be taken into consideration – a process which may slow the redevelopment. Irrespective of the financial barriers, it is possible to support redevelopment, provided the task is handled correctly. Ideally, the process should include the following steps: Market-related aspects are to be factored in at the early planning stages so as to ensure ongoing market-specific qualification of the intended initiatives. This means that planning is to be perceived as an iterative process where a group of advisers work together to lay down framework conditions that are feasible in terms of both municipal strategy, physical condi-

12