Repositioning is moving towards the top of the agenda for many landlords, and as a trend will undoubtedly gather pace over the next decade - over half of investors are expected to utilise an asset repositioning strategy this year, according to JLL's Investor Survey.
However, repurposing is complex and costly, and there are significant barriers and risks amongst the undoubted opportunities.
JLL's "Unlocking Value through strategic repositioning" unveils that there are several crucial questions to address in order to strategically identify the real repurposing opportunity, and mitigate associated risks.
From a landlord’s perspective, repurposing objectives can broadly be categorised as financially driven. Specific financial drivers include income protection, profit and risk mitigation, and many owners are re-evaluating their assets to understand the highest and best use. Sustainability is now inextricably linked with optimising asset value – to the extent that a yield differential between sustainable and ‘traditional’ buildings will soon become evident.
The relatively slow pace of repurposing progress to date is down to cost, complexity, planning, fragmented ownership, values and funding. These are not insurmountable barriers and are, in some cases, reducing – recent relaxation of the planning system should potentially ease the path, and retail values are now approaching levels where repurposing is becoming increasingly viable in more locations.
Much of the recent and current repositioning narrative centres on formulaic ‘retail to residential’ conversions. There is a risk, however, that by taking this relatively blinkered approach, the real value-add opportunity is overlooked, and landlords are potentially closing the door on other fast-emerging markets.
The key to unlocking alternate-use values is through a forensic comparison of a range of options, taking an objective, ‘sub-sector agnostic’ approach. There is not a ‘one-size-fits-all’ model that can be equally applied across locations and markets to achieve this - each redevelopment should be needs-led and requires extensive strategic planning and local market intelligence.
Much of the recent corresponding investment refers to the conversion of "commercial properties into residences". There is a risk, however, analysts say, that the real value-added opportunity is being overlooked and landlords are potentially closing the door on rapidly emerging markets such as life sciences, healthcare, education and housing for special groups (e.g. retirees). , as well as converting retail parks into logistics hubs or data centers.
While retail is the sector most affected by structural change, with the rise of internet use for day-to-day transactions leading the way, making the change of use of these properties imperative, JLL warns that asset repositioning is a much wider real estate purchase issue. Sooner or later, all asset classes will be affected, from parking spaces to offices, thanks to powerful factors such as technology, demographic changes and, of course, the COVID-19 pandemic.
How does this trend evolve in the Greek market?
You are invited to file your view in the research for building repositioning of real estate assets located in Greece, and contribute the insights derived from the Greek real estate.
The research is carried out by ered.gr, in collaboration with the RICS Advisory Board in Greece, and the results will be presented at this year's 16th RED Meeting Point 2023, which will take place on May 3-4 at the Athens Conservatory.
