NEWS FROM THE FRONT DESK: Let’s take stock. It’s a little more than a year since we emerged from our last COVID-19 lockdowns, and our CBDs have started to come alive again.
The rise of hybrid work patterns and business closures has meant they have not completely returned to their former glory in terms of office occupancy and public transport use.
But many now realise our CBDs have potential to be more than simply a destination for office workers – by attracting more residents and creative businesses to exhibit and perform there they can be transformed into thriving cultural powerhouses.
Parallel to the challenge of revitalising our CBDs are the issues of the growing affordable housing shortage to allow essential workers to live in capital cities, and the pressing need to reduce the carbon footprint of existing buildings and reduce the amount of carbon involved in constructing new ones.
These are three intersecting “wicked problems” that will need many solutions thrown at them over the coming decades to alleviate their impact.
Adaptive reuse of office spaces is one idea that has gained currency in 2023, as city planners realised that working patterns that emerged during the pandemic are structural and will permanently alter how cities are used.
The issue came up on a panel in the World Economic Forum in Davos in January with the chief executive of investment manager Cantor Fitzgerald, Howard Lutnick, calling for older, less desirable office buildings to be converted into apartments, lest they become “eyesores.”
US cities, which have large amounts of derelict or disused properties in their city centres, have been on the case for years. But recent incentives offered to developers in New York City and Chicago underscore the added momentum that the concept has gained post-pandemic.
The City of Chicago offers subsidies to building owners in the La Salle Street corridor for apartment conversions.New York City established an Office Adaptive Reuse Taskforce that in January released a report on the potential for conversions.
And California went one step further in passing legislation to allow apartments for low and middle income people to be built in underused commercial space by combining two planning codes.
Plans for the conversion of the former JP Morgan Chase and Daily News office building at 25 Water St in New York City has been held up as a model for how to turn an unsightly utilitarian concrete block into attractive and liveable residential spaces.
But can adaptive reuse of office buildings work in Australia?
Sydney has a handful of examples where offices have been successfully converted into apartments – such as the former NSW Police Headquarters on College Street and the former TNT offices in Redfern. These were completed around a decade ago.
But industry experts struggle to name recent or upcoming examples of office conversions. The seeds have been sown, but concrete plans (pun intended) have failed to materialise.
“CBDs are not going to bounce back to their former glory. The model of commercial and retail has worked for us in the past, but it is now more vulnerable to economic downturns. We need to make CBDs have other uses than commercial and they need to operate 24/7,” David Harding, president of Business NSW and former Arup engineer told The Fifth Estate.
Business NSW released a study on revitalising CBDs that unsurprisingly pointed to a lack of flexibility in planning controls that is inhibiting change in Australian cities.
Much of the CBD is zoned B8 Metropolitan Centre, which only allows a single use in each building. Creating communities with residential, retail and other services such as healthcare and childcare will require parts of the city to be rezoned as mixed use.
The nitty gritty: how to enable adaptive reuse
“Planning authorities need to get on the front foot and say we’re open to adaptive reuse,” Harding said.
“Authorities need to accept that the world is changing and adapt quickly accordingly and adapt and facilitate projects – recycling of key assets particularly in a falling commercial market is an economic imperative and an environmental necessity.”
The UK has made a tweak in its planning law known as UK Use Class E, which authorises any types of commercial activity within a given building.
Developers will likely need incentives to take on ambitious projects such as 25 Water Street because they are expensive and engineeringly complex, and are unlikely to produce even a small amount of affordable housing, which cities sorely need to address shortages.
Mott MacDonald built environment sector leader Andrew Pettifer agreed that flexibility is needed when applying current planning controls to adaptive reuse projects.
“Planning guidance around apartments is driven around the presumption that you’re designing a new building – they are reasonably prescriptive about access to natural light, cross ventilation and balconies.
“All those things are a challenge when you’re looking to modify an existing building – if that’s something that governments want to do in a meaningful way, they will need to think about what compromises would be permissible.”
Are our office buildings suitable?
An average Australian office block from the 70s or 80s tends to have very large, deep floor plates, services concentrated in the middle of the buildings and highly inefficient cladding on their facades.
Planning controls for apartment buildings on the other hand require high levels of natural light, cross-ventilation, and the ability of windows to open (which most office buildings do not have). Some architects have gotten around this problem by making atria in the building’s core to allow natural light to proliferate and provide windows.
“If you think about 80s and 90s office buildings with very deep floor plans, not many of these will work. You will end up with apartments with long narrow corridors and windowless bedrooms. Across Sydney, there might be 10-20 buildings that are suitable for this type of adaptive reuse,” University of New South Wales associate professor Philip Oldfield said.
Adaptive reuse projects are high-stakes games – there may be differences in the structural load between an office and an apartment building, and they generally need to be stripped back to their cores to make the changes required.
Services need to be decentralised away from the core which requires space that can compromise ceiling heights, and fire escapes need to be relocated so they are close enough to individual apartments.
Meeting requirements for natural light and accommodating all these changes tends to reduce the number of apartments that developers can create in a building, which in turn reduces the yield and financial attractiveness of the project – hence the need for floor space incentives to improve the economics.
If you are from a council or government and are reading this with raised eyebrows, fear not, we don’t believe that the buck stops with the public sector.
Embracing adaptive reuse requires a cultural shift on the part of developers, too. After all, they’re not exactly choking up the planning system with adaptive reuse DAs right now.
Encouraging more mixed-use design “will require an adjustment in mindset for some developers, investors and valuers. This will necessitate updating models and risk calculations to account for the reduced risk profile of mixed-use buildings. It will require a more patient approach from capital investors as rapid recovery of capital is replaced by durable and predictable returns,” according to the Business NSW report.
In some ways, councils and developers are playing a game of chicken – each one is waiting for the other to move first.
Arup New South Wales commercial property leader Cameron Dymond points to one recent City of Sydney law change that might offer developers the flexibility they need.
Local Environment Plans (LEP) have been amended for “Cluster Sites” where developers can negotiate site-specific development control plans (DCP) – and crucially, ask for flexibility on some of the usual planning controls that apply to new apartment buildings.
Adaptive reuse is well worth considering to address housing shortages and to breathe life into tired office blocks while saving a truckload of carbon, but it isn’t the magic bullet solution some are holding out for.
But it is well worth investigating how the planning system can flex to accommodate buildings that will be a central part of our CBD’s revitalised mixed-use future.