Grade B's Comeback?

Unlocking Value in Maturing Office Assets

The pandemic era gave rise to a slew of speculation around the death of the office, the owners of secondary office space could be forgiven for feeling despondent about how to make the best use of their potentially redundant stock.

Five years down the line, the working world is changing again. With a perceived shortage of Grade A stock in major urban centres, balanced against the increasing demand for office space as the return-to-office trend gains momentum, could this be the opportunity for a comeback?

In a wide ranging discussion, we unearthed 5 key takeaways:

1. What on earth is Grade B? It transpires there is no set industry definition (unless it counts to say ‘anything that is not Grade A…’). It is not all about the fabric of the building, its green credentials or the amenities it provides. The old property mantra, location location location is key. An otherwise ‘Grade B’ office, in a prized location with access to the best transport networks can become Grade A. And vice versa. Those in secondary locations have more to do to attract tenants and maximise their rental returns.
2. The building: gimmicks versus amenities Services and facilities in the building must be what occupiers want and need and not just be gimmicks. Some amenities which the developers of newer office buildings are offering (think auditoriums, meeting spaces etc.) can easily be replicated when refurbishing a Grade B office, to compete more readily with the newer, shinier kids on the block.
3. The TWT conundrum While footfall in the office is no doubt increasing, the fact remains that Mondays and Fridays are more favoured as ‘wfh’ days. Many buildings are almost empty on these days, which is hardly the best use for them or the rent that their occupiers are paying. Building owners can do more to encourage users to use the buildings on the quieter days, whether it is hosting events or hiring out communal areas.
4. Placemaking The TWT conundrum needs to be resolved to mitigate the impact on bars, restaurants and shops in the surrounding area. Placemaking is critical to ensure the area remains attractive and vibrant for office users – and the wider community – seven days a week. This is easier to resolve for those landlords who own a number of properties in the same locality.
5. Viability concerns? With construction costs remaining high and interest rates holding, refurbishment or redevelopment require higher rents in order to be viable. Crucially however, the view of the room was that occupiers are prepared to pay - if the space provided matches their needs and where they want to be in order to provide the best environment for the workforce.

The office market has gone operational

The flexible workspace sector has grown up. What many first saw as a scramble to fill voids and a response to hybrid working has evolved into something far more permanent – a fundamental shift in how offices are designed, operated and valued.

I’ve seen this evolution from the inside. Before joining Office Ready Tech (ORT), I helped build and scale Landsec’s Myo platform and later supported GPE in reimagining and scaling its fitted and fully managed portfolio. Those experiences made one thing clear: flex was never just about shorter leases. It was about operating buildings differently – around customer demand.

Flex used to be shorthand for lease length. Today, it’s shorthand for service, amenities and experience. Occupiers – and their employees – now expect flexibility, hospitality-level service and technology that works seamlessly, whether they’re dropping in for a day or signing a five-year lease.

That’s why landlords aren’t chasing agility for the sake of it. They’re pursuing income stability through agility. The ability to flex space, services and technology around changing customer demand doesn’t make income less predictable – it makes it more resilient.

So, the question is quietly shifting from “should we offer flex?” to “how do we operate profitably and consistently in a flexible world?”

Operational real estate isn’t a separate asset class – it’s simply the office market, evolved. Every landlord is now, to some degree, an operator. And operators are only as strong as the systems and processes behind them.

This is where technology matters. It’s what turns a lease into a service and a building into a business. Connectivity, access control, AV and data infrastructure are no longer fit-out extras – they are the foundation of operational performance, customer experience and value.

At ORT, we sit right in that space. We help landlords and operators move from assets to platforms – designing and running the digital backbone: resilient connectivity, integrated access, intelligent AV and data that drives decisions. The conversations we’re having aren’t: “How fast is the Wi-Fi?” They are: “How do we monetise connectivity?” “How do we capture and use building data responsibly?” “How do we deliver a consistent experience across a portfolio?”

And crucially – we’re not theorising about it, we’re doing it. The value of technology in real estate isn’t in the hardware, it’s in the outcomes: faster leasing because the building is pre-connected; higher retention because the experience just works; and lower operational drag because systems speak to each other and don’t rely on manual fixes.

When the digital layer is in place from day one, landlords can flex floors, switch operators, onboard tenants in hours not weeks, and understand how their buildings are actually being used. That’s what turns flexibility from a cost into a margin – and a building from a space into a platform.

Here’s the real risk for building owners: occupier expectations aren’t standing still. If a building already feels slightly outdated today, with the current pace of change, it may start ageing in dog years. Standing still in this market isn’t holding position– it’s falling behind, fast.

The future of offices won’t be defined by lease length, but by how well a building operates – how seamlessly it serves its customers and delivers on its promises.

At ORT, our role is to put the right digital infrastructure in place from day one so buildings don’t just work today, they’re ready for tomorrow.

I look forward to discussing all of this at Estates Gazette’s Office Evolution event in November.

Time’s up for London’s obsolete offices — What’s next for Grade C?

All office buildings have a finite lifespan, and for London’s Grade C stock, the clock may have run out. Post-pandemic shifts in attendance and tightening environmental regulations have created a perfect storm for tertiary office assets.

The regulatory squeeze

The average full-time worker in central London now spends just 2.7 days in the office per week, down from 3.9 days in 2019. At the same time, Minimum Energy Efficiency Standards (MEES) require offices to meet an EPC rating of E to be let - rising to C by 2027 and B by 2030.

With persistent low demand for sub-prime space and cost inflation outpacing rental growth, refurbishment programmes are increasingly proving economically unfeasible. Owner-occupiers and fund managers are left scratching their heads as traditional strategies like letting at reduced rents, refinancing, or selling into a recovering market are no longer viable.

Convert, redevelop or risk obsolescence?

Faced with declining asset value and tenant attrition, landlords are left with three options: convert, redevelop, or risk obsolescence.

Conversion to residential or alternative uses seems obvious. London’s housing shortage and strong returns from hotels, co-living, and student accommodation offer theoretical upside. But large office grids with deep floor plates, limited fenestration, and complex M&E systems often preclude viable conversion without substantial redesign of the entire structure.

Even where permitted development is possible, C3 residential use triggers affordable housing requirements, curtailing net efficiency. Even when permitted development is achievable, forward funders remain cautious, leaving developers reliant on mezzanine finance to bridge the LTV gap left by senior lenders.

Demolition: A last resort

When conversion or retrofit proves unviable, demolition and redevelopment may be the only path forward. Given the surplus of new office supply in secondary and tertiary locations throughout the 80’s and 90’s, replacing Grade C stock with new Grade A space is rarely feasible. Planning permission is costly and slow, and Gateway 2 checkpoints under the Building Safety Act add further delays, risk and cost onto developers.

The development process has evolved into a high-cost, high-risk, highly regulated landscape, deepening the divide in the office market.

The office divide

Grade A and well-located Grade B offices are thriving. With reduced competition from obsolete stock and rising development costs, prime assets are consolidating their market position and commanding premium rents.

Meanwhile, Grade C stock faces bleaker prospects, and landlords must navigate a labyrinth of regulation, planning risk, and economic uncertainty.

Despite the challenges though, there are still reasons to be optimistic. Carefully designed schemes tailored to local market demand can succeed. Central Government and City Hall are working to accelerate planning and Gateway delays, and new grant funding is being prepared to support large-scale redevelopment.

The message to owners of Grade C office stock: while the current use may be obsolete, the next chapter could be prosperous - with the right strategy, advice, and vision.

UK office sector 2025: Investment opportunities

The UK office sector is navigating a period of transformation, shaped by a combination of post-pandemic recovery, changing work habits and evolving tenant demands.

There are signs of renewed optimism in both the regional and London office investment markets, with reported upticks in investment activity and occupier take-up since the start of the year.

The race for space is increasingly defined by quality rather than quantity, where new or refurbished offices stand out as the preferred choice for many businesses. However, the supply of premium office stock remains limited, and in the City of London is expected to be below market requirements in the coming years. The resulting imbalance continues to drive rental growth and presents opportunities for investors to act now.

The predicted “death of the office” following the global lockdowns of 2020 did not materialise but the world of work has changed.

The office market has become increasingly polarised and there is a marked divergence in occupier demand between new (or fully refurbished) offices and secondary stock.

As companies focus on attracting and retaining top talent, tenants are now seeking office spaces in the right location with modern amenities, employee wellness facilities, smart tech and flexible layouts.

From a legal perspective, occupiers are increasingly requesting flexibility in terms of alterations, permitted use and the ability to sublet and share the premises.

Many tenants are interested in ESG factors and the sustainability features of their building. Green offices enable businesses to meet their own ESG targets, and we are seeing increasing use of green lease clauses in lettings of premium buildings. ESG and sustainability are also now core value drivers in today’s office investment market.

Grade-A office buildings, known for their superior location, design and amenities have proven to be resilient investments to date. The issue is there are simply not enough of them.

Planning constraints, increased construction costs, evolving legal regulations, economic headwinds and geopolitical uncertainty have all contributed to the downturn in construction of new buildings. Therefore, landlords and investors are increasingly turning to refurbishment to meet occupier expectations.

Much has been written about the “retrofit revolution” and this is certainly gaining momentum. Investing in grade-B office properties can provide significant benefits through strategic improvements and repositioning. By enhancing the physical environment of these spaces – whether through refurbishment, improving energy efficiency and/or adopting modern workplace technologies – investors can unlock latent value and appeal to a broader range of potential tenants.

From a sustainability perspective, refurbishment is the best way to create higher-quality offices. Anticipated legal changes mean this may soon become a necessity for some buildings. We expect minimum energy performance standards to increase at some point – the government indicated it would publish a response to the 2021 consultation on MEES for commercial property early in 2025. Nothing has been published to date but the response may be published together with the government’s response to the EPC consultation, which closed earlier this year.

Any increase in MEES for the commercial property sector could hit the office sector particularly hard. According to research from property data and tech firm Search Acumen, just 15% of offices have a B rating or above, which is the expected future minimum standard for lettings.

This all combines to present both opportunities and challenges for the UK office sector in 2025. As ever, staying attuned to tenant requirements and regulatory changes will be fundamental to making informed investment decisions.