The wonderful world of office ...

These numbers are not new - if you look at the % of stock that is currently rated below the target energy efficiency levels in most European countries ... only about 30% meets the targets ... about 30% sits in the 'gray area' of needing some capex to meet the target ... and about 30% is really too far gone to be retrievable.In practice most of bottom 30% is already valued to reflect that risk and a lot of it will be in locations that are largely office irrelevant post pandemic ... and will get (or is already getting) repurposed into resi or some other use ...The real works sits in the belly of the market ... the middle third ... that needs capex and a comprehensive repositioning programme and not all owners have the skills and financial resources to meet the challenge  ...  in practice it is not much of a stretch to asset that the best located assets in that category are going to get what they need ... simply because the supply of high quality well located stock is limited and there are more tenants that good buildings  ... the challenge will be the bottom end of that middle slice ...lets say 50% to 65% by qualityMy guess is that when it all washes through - the market have been split down the middle ... the top half of what we have will still be there and performing very well - largely because there will alot of tenants struggling to find a home given a much smaller inventory of stock ... the bottom half will have largely disappeared ... into alt use ... and before long people will be bidding up the levels of rents in office markets and that will be a wonderful excuse for another office construction cycle!