The walls remember: a lesson in building conversion risk

A story worth watching from New York is the evacuation of the city's largest office-to-residential conversion project – the redevelopment of the former Pfizer headquarters in Midtown Manhattan – after reports of buckling structural columns and sagging floors led to concerns over a potential partial collapse.

Structural headaches aside, what struck me is that this is not just a New York story.

It reflects a trend we are seeing across the UK property market – and increasingly in Edinburgh.

In recent years, asset managers have been grappling with the challenge of finding occupiers for ageing secondary office stock. The solution now being pursued in many cities is repurposing offices to hotels, student accommodation, and residential.. The logic stacks up – changing working patterns, growing demand in the living and hospitality sectors and, in some cases, a building which is simply no longer viable as an office.

The events in New York are a useful reminder that changing a building's use is not as simple as changing the sign above the door.

Many buildings being targeted for conversion were designed for a completely different purpose – structural loads, servicing requirements, floorplates, fire strategy, vertical circulation, plant requirements and building regulations all need to be reconsidered. The further a redevelopment moves away from the building's original design intent, the greater the technical and commercial risk can become.

In Edinburgh (and to an extent in Glasgow) we are seeing a growing number of office-to-hotel projects and other repurposing exercises as owners look to unlock value from assets that may no longer be competitive in the office market.

Hopefully this will create exactly the type of regeneration our cities need - but the New York incident demonstrates why detailed due diligence, robust surveys and realistic budgeting remain critical at the outset.

The biggest risk on many conversion projects is not planning. It is what sits behind the walls, above the ceilings or within the structure itself.

Repurposing buildings is going to be a major theme across the UK real estate market for the rest of this decade. The opportunity is clear. So, too, is the need for caution. Events in New York are a timely reminder that while refurbishment and conversion can breathe new life into ageing assets, the physical realities of existing building will usually still have the final say.

Certainly not a bad time to be a building surveyor….

If you would like to discuss anything raised in this article, please get in touch with Paul Coyle or your usual Burness Paull contact.

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