The iconic Express Tower is a good
example of a real estate asset in a prime location that is ideally suited for advantageous
repositioning or retrofitting, says Santhosh
Kumar, CEO – Operations, Jones Lang LaSalle India
Even
in economically challenging times, a lot of equity capital today is
chasing prime real estate assets, presenting a monumental market for
refurbishing and repositioning.
This is especially true because prime products in prime locations are
so thin on the ground. In Mumbai, the iconic Express Tower is a good
example of a real estate asset in a prime location of India's financial
capital that is ideally suited for advantageous
repositioning.
Express
Tower at Nariman Point has always had the benefit of a distinct
identity. With long-standing tenants and a strong management structure
in place, this commercial space
edifice has no real competitors in its micro-market. The repositioning
of such an asset represents a huge upside potential for all stakeholders
– but, needless to say, doing so is no small task.
In
the case of many older buildings, a partial or complete retrofit in
terms of the building envelope, its engineering systems, seismic
resistance levels and energy efficiency
improvements are called for. Undertaking such initiatives on a building
that is located in the bustling heart of a city’s CBD presents some
logistical and tactical challenges. Apart from these aspects, there are
often also various legal aspects to be tackled
– such as upgrading the building’s compliance to new building or zoning
codes, the upgrading of its infrastructure capacity and ensuring that
accessibility is not compromised but rather improved.
Some
buildings need only marginal refurbishing in order to attain
revitalized market viability. Other assets, especially those in prime
locations, often need a complete makeover.
Some properties have the advantage of substantial land holdings, while
others are located in constrained geographies. In short, properties
which are good candidates for refurbishing and repositioning fall into
several distinct construction categories. Each
of these categories has their own level of complexity.
In
the least challenging repositioning scenario, a property may need only
cosmetic remodelling. This kind of undertaking represents marginal
disruption to existing tenants,
is relatively easy to implement and calls for minimal capital
investment. Such upgrades usually involve updating of obsolete interiors
in order to bring about a more contemporary appearance.
In
a more complex scenario, the asset requires both an internal and
external facelift, which includes all the internal aspects as well as
improvement of the project's external
image. This kind of repositioning is naturally more cost-intensive.
Some assets have the option of using even more complex strategies such
as horizontal or vertical expansion, or both simultaneously.
Finally,
retrofitting and repositioning or a prime real estate asset must be
done with clear objectives in mind. Various factors may conspire to
prevent an older building from
competing on all fronts with newer structures in the same genre. In
such cases, working towards the fulfilment of specific objectives such
as improving structural viability, energy efficiency and creating a
superior tenant experience is a good way to go.
CASE STUDY – UPGRADING THE EMPIRE STATE BUILDING’S SUSTAINABILITY QUOTIENT
In
April 2009, world-class environmental consulting, non-profit, design
and construction partners – including the Clinton Climate Initiative,
Rocky Mountain Institute, Johnson
Controls Inc. and Jones Lang LaSalle Used the Empire State Building as a
test case and model to unveil an innovative process for analysing and
retrofitting existing structures for environmental sustainability.
Adopted
as core elements of a more than $500 million upgrade program at the
world’s most famous office building, the program was the first
comprehensive approach that integrates
many steps to use energy more productively. The program's primary
purpose was to reduce energy consumption by up to 3% and provide a
replicable model for similar projects around the world.
At
the end of the project definition process, the team analysed the steps
to be taken in conjunction with other steps towards sustainability as
part of the Empire State ReBuilding
program within the framework of the existing USGBC LEED rating system.
Internal calculations show that the Empire State Building will be able
to qualify for GOLD certification for Leadership in Energy and
Environmental Design (LEED) for Existing Buildings,
and ownership expressed its intention to pursue such certification.
Commercial
and residential buildings account for the majority of the total carbon
footprint of cities around the world. Most new buildings are built with
the environment in
mind, but the real key to substantial progress is reducing existing
building energy consumption and carbon footprint. The innovative process
adopted at the Empire State Building has developed new techniques for
modelling and organizing an integrated program
and offers a clear path to adoption around the world, leading to
significant reductions in greenhouse gas emissions.
Along
with other steps taken in recycling waste and construction debris, use
of recycled materials, and green cleaning and pest control products, the
model built at the Empire
State Building significantly reduces energy consumption and
environmental impact and allows more sustainable operations.
Simultaneously, it enhances profitability and tenant comfort.
The
project partners used existing and newly created modelling, measurement
and projection tools in a new and repeatable process to analyse the
Empire State Building and establish
a full understanding of its energy use as well as its functional
efficiencies and deficiencies. This provided actionable recommendations
along a cost-benefit curve to increase efficiency and without harming
bottom line performance.
In
reviewing more than 60 optional activities, the team identified eight
economically viable projects, applicable to building-wide renovations,
electrical and ventilation system
upgrades and tenant space overhauls that provide a significant return
on investment, both environmentally and financially.
In
a distressed economic climate, there is a tremendous opportunity for
cities and building owners to retrofit existing buildings to save money
and save energy. Not only has
this project dramatically reduced the Empire State Building’s
environmental impact, but it was done in a way that provides meaningful
costs savings to the building as well as its tenants.
