Link vacancy issue to building sustainability

'From more to better'

Supply and demand in real estate are in flux. Sometimes it is difficult to find a location, elsewhere vacancy threatens. Cees-Jan Pen studied for North Brabant how the province's cores can be strengthened in this context. Issues in social real estate still play too little of a role for regional governments, Pen et al. "We have to get rid of growth thinking, and strengthen the inner cities and village hearts with an integral approach to the vacancy problem: from more to better."

Chief Government Architect Floris Alkemade sees an important role for healthcare real estate in neighborhood development. According to Pen, lecturer in Regional Competitiveness at Fontys University of Applied Sciences, the solution lies more at the root of real estate needs. Contrary to what economic prosperity might suggest, the number of vacant buildings will continue to increase in the coming years, says his working group BrabantAdvies in the advisory report Blind Spots (December 2018), and that, according to Pen, exposes a structural problem. "The retail vacancy rate, for example, is now being filled primarily by regular housing development and the increase in hospitality offerings."

Developments such as digitization, shrinkage and de-greening, market forces in healthcare and the rise of the sharing economy mean that fewer and fewer buildings are needed across the board, the advice says. This includes not only stores, offices and business parks, but also care homes, sports fields, schools, vacation parks, monasteries and churches. "To prevent future vacancy and promote sustainability, focus is needed on the existing stock: restructure, transform and where necessary, the sledge hammer. We must get rid of the growth mindset: from more to better. The quality of the building must again take center stage. That also means: using circular materials and creating buildings that are easy to demolish."

'Invisible vacancy'

One solution offered by the BrabantAdvies working group is linking the vacancy issue to the sustainability of the building stock. "This requires attention to the sometimes less visible, and therefore underexposed forms of vacancy - the 'blind spots', especially in social real estate. There is a lot of vacancy in existing healthcare buildings and schools. And that is a shame, because the money involved is at the expense of good education and hands at the bedside."

Plans aplenty for inner-city reinforcement and multipurpose buildings, but they are not yet coming to fruition, Pen observes. "There is little attention to this at provincial and municipal levels." Money is a problem, as is a lack of priority. "Regional governments have obviously had a lot on their plates in recent years - especially in the social domain, and then this comes on top of that; housing corporations are being curtailed in their investment space partly because of the landlord levy. There is a real need for financial incentives and other laws and regulations to get real estate sustainability off the ground. One incentive could be that these kinds of transformations will yield a rebate on the landlord levy. Bottom-up alliances are needed between governments and institutions, corporations and market players, not a classic top-down development aimed at growth."

'Sustainability is a necessity'

Building owners should invest and provinces or municipalities should take up their directorial role, Pen said. According to the social geographer, a researcher at "the interface of economics and practice," in principle there is enough intrinsic motivation among these parties to follow the advice, including the province and municipalities. "The alternative is impoverishment of the supply of facilities, resulting in large local differences in quality of life. Inner-city locations are more complicated than expansion locations, but the tide regarding growth thinking has turned. Just look at the nitrogen discussion. Making the real estate stock more sustainable is a necessity."   

Quick scan healthcare real estate in 'Blind Spots'

According to the latest calculations (National Vacancy Monitor, 2017), the vacancy rate in healthcare real estate is 11%. Given policy developments, the vacancy rate is expected to increase substantially (estimate 25%) . There are several reasons for the expected increase, notably decentralizations in implementation and longer home living. 'Due to high depreciation costs, demolishing care real estate is often too expensive, while finding a new destination takes a long time, let alone whether there are new functions,' according to the advisory report 'Blind Spots' by the working group BrabantAdvies, which includes members of the Provincial Council for the Living Environment.

According to research, nursing homes in North Brabant are among "the most recent ones with the largest rooms. This makes the stock particularly suitable for conversion into residential units, for example, with or without home care. There are also opportunities for linking nursing homes with student housing, neighborhood meeting centers and/or commercial functions.

'Possibly, through a restructuring fund for surplus real estate, small healthcare organizations could be supported in restructuring and downsizing their real estate portfolio. The fund acts as an intermediary between healthcare institutions and investors, and possibly also pension funds. Healthcare institutions transfer their buildings and land at book value to the fund. Then the fund's goal is to monetize the land and buildings in the long term'.