Refurbishment vs Retrofit: Key Operational Considerations

Posted by Knight Frank Newcastle on 7th November 2024 -

Charlotte Owen, Partner in Property Asset Management, and Victoria Whiteley, Associate in Project & Building Consultancy, explore the complexities of refurbishment versus retrofit decisions in commercial properties. They address the practicalities of balancing building functionality with sustainability and regulatory compliance.

Our recent Property Performance event explored the issues faced and opportunities presented by retrofitting and repurposing commercial buildings. Two of our experts addressed the practicalities of balancing building functionality with sustainability and regulatory compliance. 

Charlotte Owen, Partner, Property Asset Management, presented an in-depth analysis of the refurbishment versus retrofit debate, focusing on the operational impacts and decision-making processes involved in choosing between these two approaches.  

She began with a case study from a current client. A 250,000-square-foot commercial building in the city of London, roughly 15-20 years post-major refurbishment, with an EPC rating of C. The building’s leases were expiring within the next two to three years, and the client faced a crucial decision. They needed to update the building’s amenities, address obsolete plant systems, and improve energy efficiency. The question: should they pursue a retrofit, allowing the building to remain operational, or undertake a full refurbishment, potentially closing the building in the process? 

To guide this decision, it’s important to understand current occupiers’ needs and communicate how the building’s improvements could align with their operational goals. Increasingly, occupiers are looking for lease renegotiations (regears) that help meet their own sustainability and operational targets.  

Weighing the options: Disruption, energy, comfort, and costs 

Charlotte identified several key factors to consider when weighing refurbishment against retrofitting. The first and most obvious issue is disruption. Both retrofits and refurbishments inevitably cause some level of interruption for current occupants. While a retrofit allows the building to remain operational, it can still involve significant disruptions. Refurbishment, however, typically results in more visible and extensive disruption, especially if major structural changes are required. 

Energy performance goals are another critical driver in the decision-making process. Charlotte highlighted the importance of achieving energy-efficient outcomes, including quick wins like installing LED lighting and upgrading boilers. These retrofitting options, which can often be done with occupants in place, help improve the building’s EPC rating and contribute to longer-term sustainability and regulatory compliance. 

Comfort and functionality were also high on the agenda. Enhancing the usability and appeal of commercial spaces not only improves occupier satisfaction but can also attract higher-quality tenants. The need for careful planning regarding amenities is crucial, such as food and beverage offerings, end-of-trip facilities, and outdoor spaces. Understanding whether the space can accommodate these features and who will manage them is key to future-proofing the building. 

Finally, it’s important to factor in the operational costs involved, particularly the balance between initial investments and long-term savings. While retrofitting may have a higher upfront cost, reducing operational expenses can yield significant savings in the long run. 

Charlotte highlighted the need to: 

• Thoroughly understand the building and its occupiers’ needs
• Collaborate closely with occupiers during the decision-making process
• Leverage project management teams effectively during lease renewal discussions.
• Repositioning and repurposing: practical considerations  

Victoria Whiteley, Associate, Project & Building Consultancy, shifted the discussion to the practicalities of refurbishing or repurposing buildings. She began by highlighting that the decision to demolish or refurbish a building is rarely straightforward. Most projects lie somewhere between these extremes, influenced by a complex set of factors, including economic viability, market trends, user expectations, and environmental regulations. 

The key challenge is finding the right balance—developing projects that improve building functionality and ensure long-term adaptability while minimising embodied carbon and preserving the history of the space. It’s important to focus on quality, sustainable buildings that better serve local communities and adapt to future market demands. 

Legislative, physical, and functional challenges 

Victoria outlined several critical considerations when dealing with refurbishment and repurposing: 

Legislation 

With increasing regulatory scrutiny, especially in light of the Building Safety Act 2023 and the final Grenfell Inquiry report, legislation plays a crucial role in decision-making. Victoria provided an example of a current refurbishment project in the City of London, where insufficient base-build design information required extensive surveys to meet fire safety regulations. Conducting thorough fire audits during the feasibility stage is essential to avoid costly revisions later. 

Energy performance 

Achieving an EPC B rating or higher often involves different levels of intervention based on the building’s age. Newer buildings, such as those constructed after 2010, may avoid the need for extensive façade and window replacements. However, transitioning to an all-electric building, for example, may still require substantial upgrades to the electrical supply. 

Functionality 

Occupied buildings pose unique challenges when undergoing refurbishment or repurposing. More intrusive works often make it difficult to retain tenants, but proper project sequencing and a robust communication plan can mitigate these issues. 

Key takeaways for successful refurbishment or repurposing projects 

• Understand the building’s construction and history
• Stay informed about evolving regulations
• Collaborate with project managers early to protect value throughout the project
• Prioritise contingency planning to manage risks and ensure financial viability 

Ultimately, whether opting for retrofit, refurbishment, or repurposing, it is vital to plan thoroughly from the outset to avoid unexpected costs and delays. 

The first of our three-part sustainability series, Defining a Strategy, focuses on meeting the commercial property retrofit challenge. Our research examines the impact of obsolescence and provides practical guidance on formulating your decarbonisation strategy and driving property performance. The second part of the series, The Business Case for Action, begins to weigh the benefits and costs of intervention to begin to uncover optimal solutions.

How can we support you with asset repositioning? 

We work holistically across consultancy teams to help our clients maximise their asset performance, identify actions and opportunities for asset repositioning, creating practical and actionable strategies. Get in touch to find out how we can help.