How repositioning helps preserve real estate value

Faced with growing pressure from shareholders, employees and wider society, businesses are increasingly seeking buildings that support sustainability goals and deliver social value to their communities.

Meanwhile, if cities are to meet net zero targets in the coming years, the volume of retrofit projects will need to triple, according to JLL.

More than ever, tenants are attracted to buildings with a roadmap for decarbonisation, spaces that are flexible and efficient, and those that contribute to wellbeing and their local communities. Assets that don’t fit this bill risk higher vacancies and a ‘brown discount’ on rental yields.

Repositioning a building by re-evaluating its use class and considering how it can better serve people, can unlock significant value and create a more resilient asset.

Here’s how:

• Lower risk by diversifying tenant profiles

Introducing new uses into a building enables a more diverse mix of tenants, reducing reliance on one market and creating opportunities to tap into booming sectors with high demand for real estate.

In cities as dynamic as Dubai, there are always opportunities to diversify or repurpose properties to suit market trends. With a large stock of retail malls and the evolution of hybrid working, we are starting to see an eclectic mix of usages around these components. For example, Aldar's headquarters in Abu Dhabi was repurposed from retail space and is now the pinnacle of future regional offices. The adjacent mall has also repositioned itself with entertainment, offices and fitness elements.

Within JLL’s Project and Development Services teams, the core of our expertise lies in identifying how to create more utility – and value – in a commercial space, based on market trends and user expectations.

• Regenerate spaces by widening use

In many office buildings, the ground floor is becoming a vital space for integration with local communities. Repositioned projects might add public amenities such as collaboration spaces, retail and restaurants, or turning unused spaces into green zones that benefit both building users and the wider public. 

Reimagining how a space could be used can bring people and businesses into under-utilised buildings, creating new value for communities and contributing to regeneration.

Take the redevelopment of two vacant office buildings for example. Our team repositioned these assets from multi-tenant spaces into Heriot-Watt University’s new Dubai campus, a technology-rich learning hub with modern design and sustainable features.

• Support environmental targets

With buildings accounting for more than 60% of carbon emissions in cities, metropolitan governments are increasing pressure on investors and landlords to improve real estate impact. Repositioning can help meet these environmental targets through tailored criteria for holistically improving an asset.

Several dimensions must be considered to minimize the carbon footprint of a redevelopment; choosing the right materials; recycling others and minimizing construction waste. Efficient building systems, renewable energy sources and use of biodiversity can all help reduce future carbon emissions, while resilience towards climate hazards is a key factor in delivering long lasting value.

Developers and operators in the Middle East are recognising the value of low-energy high-performance buildings and are increasingly seeking to achieve operational savings whilst increasing the value of their assets through a more sustainable approach.

• Create a flexible, resilient asset

Investors ultimately want to attract and retain tenants over the long term. Repositioning a building not only enables asset owners to meet the needs of today’s businesses, but also construct a space that’s more easily upgraded to accommodate future requirements.

The challenge is in finding equilibrium between market trends, users’ expectations and financial constraints, as well as overcoming the technical hurdles of sustainably redeveloping a space with future flexibility in mind. On top of that, while municipal authorities typically support projects that add social value, there are legislative and technical requirements when changing building use.

That’s where the benefit of expertise comes into play. Our teams help landlords and investors plan and execute sustainable repositioning projects, with insight-driven value creation strategies that streamline legislative complexities and support the vision of local authorities.

In Saudi Arabia for instance, a collection of historic and cultural palaces that formerly served as royal residences are being converted into luxury boutique hotels as a key part of the Kingdom’s aim to become a global tourism hub and attract 100 million tourists annually by 2030.

Multiple-use space is the future

What people expect from buildings is changing. Flexible density of use is now a critical element in redevelopment and we’re seeing single-use spaces like office towers give way to mixed-use, multi-functional spaces, with services for building users and the public alike.

Real estate that is flexible, sustainable and beneficial to communities will increasingly draw demand – and landlords and investors who invest in repositioning their buildings stand to generate financial, environmental and social value.