While gleaming new buildings may get fawned over as potential future trophy assets, the future belongs mostly to existing ones. Analysts predict 80 percent or more of the buildings that will exist in 2050 are already standing. In some mature markets in Europe and elsewhere, estimates run as high as 95 percent.
Investors have various options with what to do with their existing stock. They can, of course, do nothing. But standing pat risks obsolescence and future stranded assets. Energy efficiency and resiliency standards keep increasing, making the need for upgrading older assets more important all the time. Then there is repurposing — known as adaptive reuse — where, for example, underperforming office, hotel or retail assets can be transformed into multifamily, student housing or mixed-use properties.
It is widely believed only a small percentage of such assets can be repurposed in a financially viable way. But this attitude is changing. “Current industry trends
