Risks to consider amid the refurb boom

A more ambitious attitude towards carbon standards is one of several reasons why architects and developers are swapping new builds for refurbishments. But despite the benefits, doing-up rather than tearing-down is not without its challenges. Firms will need to be aware of and actively mitigate against costs and complexity if they are to minimise their risk exposure.

Environmental concerns driving new refurbishments

Renovations, repairs, and existing buildings have moved to the forefront of firms’ activity in recent years, in what has been described as a ‘boom’ of refurbishment within the sector. Urban areas, unsurprisingly, are a particular hotbed of activity; during the six months prior to September 2022, the City of London saw the launch of 1.7 million square feet of new refurbishment projects (opens a new window), equivalent to two-thirds of the total volume of all new schemes.

Driving this trend are several factors. In the UK, building owners face pressure to meet the demands of the Government’s Minimum Energy Efficiency Standards (MEES) (opens a new window), which necessitate that rented commercial properties have an energy performance certificate (EPC) of at least B by 2030. Given the sorry state of much of the UK’s building stock – according to estate agent Savills, 74% of UK offices are below the required standard (opens a new window) – refurbishment offers an effective means to prevent assets from becoming stranded.

But regulatory pressure isn’t the sole influence driving firms’ actions. Businesses themselves are increasingly giving priority to environmental, social and governance (ESG) criteria, while high-profile demolition and rebuilds risk drawing unwanted public scrutiny. The soaring price and reduced availability of building materials have further increased the appeal of refurbishments relative to typical new builds.

At the same time, changes to working patterns in the wake of COVID-19 have led many firms to re-evaluate their office requirements. In February 2023, the British Council for Offices (BCO) released an early update to its specification and fit-out guides (opens a new window), accounting for both net-zero carbon (NZC) ambitions, and hybrid working practices. The guidance included a recommendation to reduce workplace density occupation criteria from 8m² per work setting and 80% utilisation, to 10m² and 60%.

A complex undertaking

When it comes to meeting these emerging needs, refurbishment can be an effective solution. But the process also brings with it potential risks that architectural, engineering, and construction must consider:

  • Complexity – refurbishment projects necessarily involve a range of variables, from operational energy to embodied carbon. Firms must weigh these carefully when determining what to retain or replace. Additional time and effort may be spent working around existing building structures and services.

  • Cost overruns – may occur due to a range of factors, including unforeseen structural issues, changes in project scope, and delays in the delivery of materials or equipment – an exposure exacerbated in light of still-ongoing supply chain disruption and lack of availability. Firms may be forced to seek alternatives, absorb the costs, or pass them onto their clients.

  • Health and safety issues – particularly relevant when working on older buildings, which may contain hazardous materials such as asbestos or lead. If firms fail to properly identify and manage these risks, they may face legal action or damage to their reputation.

  • Environmental damage – may occur where firms fail to effectively manage the disposal of construction waste, or non-environmentally friendly materials. In addition to the potential legal and reputational risks associated with this issue, firms may also face financial penalties for non-compliance with environmental regulations.

Underpinning each of these challenges is a lack of policy clarity on defining NZC buildings. Many firms have been left confused by the proliferation of industry tools, accreditations, and certifications.

Protecting against loss

To mitigate against the risks that refurbishment works pose, there are number of measures that practices can implement. These may include:

  • Conducting thorough risk assessments at the outset of any project, and developing contingency plans to address potential issues that may arise

  • Ensuring adequate resources are available to undertake refurbishment projects while remaining profitable

  • Identifying all specialist skills and knowledge needed to undertake the work and determining whether these are present within the firm, or whether external contractors and consultants may be required

  • Regularly investing in new technology and equipment to improve efficiency, reduce the risk of delays, and ensure that projects are completed on time and within budget

  • Implementing waste management processes across project sites, and ensuring staff are trained in environmental best practice

As part of a robust risk management strategy, firms should also consider taking out comprehensive insurance coverage that addresses the specific risks associated with refurbishment projects. This may include coverage for professional indemnity, public liability, employers' liability, and environmental liability. Firms may also need to consider purchasing additional coverage for risks such as cost overruns, delays, and the failure to meet NZC requirements.

In all cases, it is important to ensure that any insurance policy covers all aspects of a given project from design to completion, and that the policy is tailored to the specific requirements of that project.

For further information, please visit our Lockton for Architects & Engineers (opens a new window) page, or contact:

Matthew Jones, Producer

T: +44 117 906 5027

E: matt.jones@lockton.com (opens a new window)

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