Business as we know it has drastically changed. Not only are technologies and innovation changing the business landscape, but the impacts of COVID-19 have shifted many stores, services and events to online platforms. Malls are being replaced by online retailers, fitness and therapy sessions are being conducted over the phone or on video calls, and the few in-person events that are taking place this year are doing so at a reduced capacity with social distancing guidelines.
It is widely accepted that the recent events are leading up to a global recession. COVID-19 has had an enormous impact on the world’s economy, meaning that governments and policy makers have to act quickly and fight for their countries to become stronger and more resilient than before.
There is a reduced demand for commercial property as a whole, however, there may be a higher demand for specific types of properties. For example, during and following the lockdown imposed in many countries, we have seen food delivery providers perform particularly well, as well as online stores. There is a higher demand for healthcare too, which has highlighted the areas that are most in need of additional medical facilities. So, although we are seeing a reduced demand for commercial properties such as large office spaces, restaurants and malls, there may be an increased demand for delivery-only kitchens, healthcare facilities, warehouses and operational centers.
Co-working spaces have also been gaining even more popularity in recent years. This is likely to continue into the future, as remote and flexible working become the preferred option for employers and employees alike. The idea of co-working spaces has been around since 2005. Initially they were most commonly seen as facilities to support small businesses that were not yet able to make the capital investment towards their own offices. However, there are now many larger and more well-established companies moving into business centers and co-working spaces, too.
Occupants share the same reception and meeting facilities while saving expenses and office space. They support professional networking between organizations and are a great solution for businesses that want to be more involved with their local communities. Drop-in remote working spaces are also performing well and will continue to do so now that offices are limited in capacity. These facilities offer a level of flexibility that is particularly valued after this year’s events and experiences, so we expect to see more demand for these spaces as we see a shift in preference away from the traditional types of offices.
For property landlords, sellers or developers, keeping an eye on these trends can be helpful in increasing the value of commercial assets. Where many buildings are likely to remain obsolete, vacant or unsold, it will be advantageous to renovate or repurpose them into buildings that there will be a higher demand for.
In order to become more economically viable assets, malls could be redesigned to provide large warehouses or production spaces for online retailers, the interiors of office spaces for rent could be renovated to provide socially distanced remote working booths or shared business centers, and commercial buildings could become government facilities such as police stations.
Recently, both fashion retailer Arcadia, which owns Topshop, as well as the popular department store, Debenhams, have gone into administration. This has resulted from the popularity of competitors such as ASOS and other online clothing retailers, taking a larger share of the market as well as the additional impact of COVID and lockdown rules that have turned the remaining in-store shoppers to online competitors. It seems that we are very likely to see far less demand for commercial retail spaces in the future.
Examples of adaptive reuse for retail purposes can be seen in the USA, where Amazon and FedEx have both purchased malls that have gone out of business to repurpose them into fulfilment centers. Perhaps ironic since these companies have largely contributed to malls and retail stores going out of business, but a great move nonetheless that helps to rescue unused buildings while also improving their business offering and delivery capacity in the surrounding areas.
Another successful example of a temporary adaptation of use during the pandemic, comes from the many malls that have turned their unused car parks into drive in cinemas. While the car parks are not busy with their usual visitors during the pandemic, adapting to provide a drive-in cinema presents a great opportunity for both the owners and guests. Visitors will stay safe and socially distanced but can still enjoy a social activity and malls can still earn some money and utilize the unused space.
In the post-pandemic era the economy will remain challenging, so small business owners will require innovative ideas in order to continue with business. Markets and pop-up commercial centers are one example of adaptive re-use for former commercial spaces that can support multiple businesses at once and attract a lot of customers from a variety of audiences. Timeout Markets are a successful example of this that are performing successfully and opening in cities all around the world. Old markets or unused spaces are repurposed into modern food halls and entertainment hubs that drive brand awareness and encourage engagement with vendors and consumer activity. These types of markets offer a huge platform to vendors and also flexibility, where a space can be rented for as little or as long as it is valuable to both the owners and the businesses. We expect to see more of these types of spaces and events appearing over time.
Right now, many cities are experiencing an oversupply of residential buildings and towers, where there are many empty or unfinished buildings that are unoccupied. In these cases, governments should be encouraged to make use of and invest in renovating already existing buildings, rather than starting new developments from scratch.
It is more beneficial for the economy, for the environment and for the density of cities to use properties that already exist, than to force occupants out of an area to create more buildings. So in the case of governmental and educational buildings especially, that are built to serve the surrounding communities, it makes sense to make use of already existing buildings than to invest in new ones. This has the additional benefit of allowing buildings that provide services to support city residents, to be well-located in the community, rather than being built on the outskirts. This will be better for the environment, and can also help to solve the decline in demand for property, helping to build regions back stronger.
Governments are also in a good position to be able to provide advice to building developers, investors and owners about which types of buildings are most needed by different communities. For example, governments will have data and insight into which areas would benefit most from additional healthcare facilities, specific types of residences, or schools. This is an opportunity for governments to help encourage the right types of building adaptation in order to create the best outcome for residents, while minimizing the introduction of additional unnecessary buildings and supporting real estate markets, particularly those that are under strain following the effects of the pandemic.
One example of a project CCG worked on in order to adapt a commercial facility into something more useful and beneficial to the community, is Fuheis Heights. Our Urban Planning team worked on this project to transform a former cement factory that was no longer operating but was a serious environmental and health concern, into an environmentally-friendly urban hub. The new development establishes a united community character, creates meaningful places for residents, engages the environment and promotes sustainability. It features renewable energy generation, sustainable strategies and smart systems. This project has made use of the derelict industrial building and in its place created a usable and sustainable space that is a catalyst for regeneration and economic development in the area, by bringing jobs, educational and entertainment facilities, and green spaces that promote a high quality of life for residents.
While the current market poses difficulties, it also presents real opportunities for building owners to adapt, repurpose and overcome. The most viable and effective options will depend on the type of property, the location, and the demand.
CCG has worked on a number of adaptive reuse and renovation projects, and we like to help create something new, useful and beneficial to the community that might otherwise have been less productive. If you’d like to discuss any upcoming projects with us, or if you’d like to know more about any of our current or previous work, email Ghaith.email@example.com.
This article is part of our Repurpose or renovate? series, that explores the ways adaptive reuse and renovation can support building owners, developers and investors across all industries to stay profitable in the post-COVID market.
Click here to view the first article in the series.
Ghaith Abujaber is CCG’s Executive Director of Global Business Development and is based in Dubai, UAE. His rich experience includes previous positions at major real estate and tourism companies, as well as work on private and governmental projects. This has given him an excellent insight into how these types of organizations are developing across the region.