Releasing value for knowledge sector occupiers

By Matthew Prout

Many of the unique organisations and professional bodies that make up the Knowledge Sector have long histories, founded in an era of patronage and philanthropy.  The buildings they first occupied needed to demonstrate a sense of tradition, history and importance through architecture. Their real estate was a physical expression of the organisation’s sense of self, its ownership of unique knowledge and its influence in the wider political and intellectual communities.

Fast forward to the 1950’s and 60’s when newer knowledge organisations were created to reflect advancements in science, technology and medicine.  These organisations found themselves in a different architectural era, experimenting with new styles and building materials, more often than not expressing a more future looking, modernistic outlook.  Today, the buildings of that time are reaching a critical point. Little by little, they are deteriorating or disappearing. The new materials, many experimental at the time, proved to have performed poorly and weren’t able to resist the passage of time.

Many knowledge organisations now find themselves in buildings with increasingly burdensome repair and maintenance costs. These building are no longer able to serve the changing needs of occupiers effectively, because dated facilities and inefficient layouts can’t support modern working practices or meet today’s demands for sustainability, wellbeing and technology.  What makes this worse is that buildings of this era are often held on long leases whose value is reducing as time goes by.

Whether faced with the declining value of a shortening lease, a poor working environment, or increasing costs of repair, every organisation is faced with the need to be fit for the future, to be able to provide members and staff with a modern working and study environment where knowledge sharing, membership and public engagement is encouraged through good design.

The challenge is to create knowledge buildings for the future without burdening the next generation with high levels of borrowing. It is therefore vital that the knowledge sector understands the latent value of its existing real estate. This is the critical starting point for any successful real estate strategy.

Understanding how buildings can be adapted to alternative uses is a vital part of releasing value. Engaging with an experienced professional team to consider the “art of the possible” through clever architectural design and town planning advice can unlock the potential for higher value alternative uses, or perhaps reveal redevelopment potential, both of which help build a case for a relocation strategy.

Many knowledge organisations occupy buildings on a long leasehold basis. A redevelopment could unlock significant additional value to the freeholder. There can be an alignment of interest here because the freeholder may also want to reposition the building for a higher value use. Wider development opportunities with neighbouring land might also exist, so a long leaseholder could share in that upside in return for surrendering its lease. Early engagement with the freeholder can help define the parameters of value from the outset, saving time and potentially cost.

To realise maximum value from real estate it is also vital to understand current market dynamics. The timing of any option is critical – if a strategy emerges that appears to meet all of the organisation’s future goals - then its timing needs to be considered in the context of the property market cycle, financing conditions, occupier specific issues or core business milestones.

Our work with knowledge sector organisations like The Royal College of Pathologists and the Royal College of Obstetricians and Gynaecologists, helping them move from older and less suitable premises into new buildings fit for the future, has been based on our access to the latest market intelligence, combined with building cost and valuation advice, to ensure strategic decisions are made which enhance rather than inhibit value.

Similar organisations who face the challenge of having to secure their future financially often need to make a difficult decision to stay or leave their long-term homes. A move to a new building offers better prospects of remaining relevant and properly equipped to meet an organisation’s needs of the future - but it has to be funded.  Releasing latent value can be the key. Information gathering at the start of a project like this can uncover value and unlock opportunities. Detailed studies are essential to set the right foundations for an effective property strategy as is the buy in and support of members and Trustees.

To find out how we helped The Royal College of Pathologists transition to their new ‘forever home’ click here.

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