Over the years, many housebuilders have bought offices in town centres throughout the UK and converted them into flats.  As a result of this, the supply of town centre offices has fallen and rents have gone up.   

This has benefitted the owners of these buildings who have either sold their buildings to housebuilders at very high prices or kept them and rented them to tenants at very high rents. 

However, things have now changed. 

Firstly, the housebuilding industry has started to slow down due to rising construction costs and rising interest rates.  Secondly, Covid and working from home has reduced the demand for town centre offices.  Thirdly, companies are afraid to move and/or expand as the economy slows down and property costs, especially utility bills, continue to rise.

Town centre offices – what is the answer?

There are some specialist investors and developers who are still buying town centre offices and who have a much better understanding than most of how to put these building to their best use.  Owning a vacant office is very risky and you need very deep pockets to hold these buildings.  As well as having no income, you also have substantial costs in the form of interest payments on your loan, empty business rates, utility bills, insurance premiums and security costs. 

The owners of these buildings, who once were able to sell them to housebuilders or other office investors, are now starting to panic.  They are seeing the value of their buildings fall and there is limited demand from people who want to buy. 

To sum up, if you are faced with owning a vacant town centre office, it is better to either sell it to one of these specialist investors and developers or at least look at doing a joint venture with them to reduce your risk and potential loss.