Can plug-and-play office space breathe new life into Europe’s Grade B buildings?

At last week’s MIPIM 2024, when considering one of the primary themes ‘sustainability’ there has been a pivotal shift in real estate: embracing adaptive, future-ready solutions aimed at addressing the social and urban challenges facing modern Europe. Central to the discussions were sustainability and the residential housing needs, with a focus on longer-term residential conversions of underused office buildings. However, such transformations are also influenced by the current financial landscape and the thoughtful regulatory approaches many European cities have adopted. These factors can potentially extend the time period required to make these conversions. So the question is:

What can be done with underused office buildings while we await more permanent adaptations?

Plug-and-play flex offices in underutilised Grade B buildings across Europe can serve as a sustainable, intermediate solution. This innovative approach not only revitalises underused assets but also aligns with broader goals of sustainability, community enrichment, and economic resilience in the face of evolving market demands.

Unlike in the USA, where serviced offices have been a long-established business model for many landlords (making plug-and-play concepts easier to introduce post-pandemic) European landlords have yet to fully embrace this novel concept. Yet, the demand is clearly present in Europe. The strategic conversion of Grade B offices into these agile workspaces aligns perfectly with the overarching themes of sustainability, community benefit, and financial advantage. As detailed in the DWS Group report “The Transformation of European Offices,” structural changes in work habits, coupled with environmental considerations, are driving demand for such sustainable, next-generation office spaces across Europe. It identifies the biggest European cities as prime candidates for such transformations, driven by their dynamic markets and the demand for sustainable, next-generation office spaces.

The plug-and-play solution

The concept of plug-and-play real estate represents a swift, flexible solution with minimal to no hospitality services for landlords and operators looking to rejuvenate underutilised office spaces. Defined as move-in-ready environments with minimal to no setup required by the tenant, these spaces come equipped with advanced technological infrastructure, often accompanied by self-service digital platforms for tenants and high-quality furnishings, ready to facilitate immediate occupancy. Such solutions are usually cheaper than a classical coworking or fully operated office space as they have minimal hospitality services and offer 12 – 24 months leases or all-inclusive contracts. These types of contracts are attractive to SMEs or project groups not ready to commit to long-term leases due to the nature of their project or economic uncertainty. They cater to modern work styles, offering agility and flexibility in uncertain times.

Financial benefits

Financially, the transformation presents a win-win scenario. For building owners, the conversion into plug-and-play is quick (around 3 months) and requires a small to moderate capital expenditure (capex) investment, compared to any other capital projects. It provides an opportunity to capture value from otherwise vacant properties, reducing holding costs and potentially commanding premium rents.

Tenant benefits

For tenants, the benefits are multifaceted: immediate occupancy, minimised logistical burdens, cost optimisation, and the flexibility to scale operations in alignment with business needs. This aligns with the broader shift towards hybrid working models, emphasising the importance of flexibility and quality in office accommodations.

Community benefits

For communities, it means fewer “ghost buildings.” It also signifies a more sustainable and shared use of resources, in line with European shared economy trends and market spirit. This approach enhances urban vibrancy and connectivity, fostering a sense of community and engagement among residents and workers alike. By repurposing these spaces, cities can mitigate the visual and social blight of empty buildings, contributing to a more dynamic, inclusive urban landscape.

If you are interested in learning what it means to practically launch plug-and-play from a technology standpoint in an underused office building, then take a look at our “Pocket Guide to Plug-and-Play Real Estate.” For more info, reach out to  Anna Andreen.