2nd August 2023

Hong Kong based Studio X Co-Founder Rufus Turnbull looks at the emerging importance of Asset Enhancement Initiatives in commercial property development in Hong Kong Kong and Singapore and explains how Studio X have redesigned a prominent site in Hong Kong to increase rental income, improve the occupancy rate, achieve higher property valuations, whilst adopting an innovative adaptive re-use philosophy. 5 min read

An Asset Enhancement Initiative (AEI) refers to the strategic process of improving and upgrading the value, functionality, and attractiveness of a real estate asset. This process can involve implementing enhancements and modifications to optimise the property's performance, purpose and appeal. An AEI’s overall aim is to revitalise and optimise a real estate asset, making it more appealing, efficient, and valuable to both occupants and investors. Some key considerations are:-

Purpose

AEIs are aimed at maximising the value and potential of a real estate asset, ensuring it is competitive, attractive, and relevant in the market. Successful AEIs can lead to increased rental income, improved occupancy rates, higher property valuations, and potential capital appreciation.

Improvements

AEIs encompass a range of physical, aesthetic, and operational improvements to the property. AEIs help the property remain competitive in the market by adapting to changing trends and preferences.

Renovation and Upgrades

This can involve improving tenancy sizes and adjacencies, renovating common areas, lobbies, corridors, washrooms and other spaces to modernise and enhance the property's usefulness and attractiveness..

Infrastructure Enhancement

Upgrading essential infrastructure like electrical systems, plumbing, HVAC (heating, ventilation, and air conditioning), and technological capabilities such as digital advertising, smart building controls and energy efficient lighting.

Space Reconfiguration

Redesigning interior layouts to create more efficient and flexible spaces that cater to changing tenant or user needs. Incorporating tenant feedback and preferences into the enhancement process to create spaces that align with their requirements.

Safety and Accessibility

Implementing safety measures and ensuring compliance with accessibility regulations to enhance all-user experience.

ESG & Green Initiatives

Incorporating environmental and socially sustainable features like energy-efficient lighting, water-saving fixtures, and eco-friendly materials to reduce environmental impact. Incorporating durable materials and designs that ensure the enhancements have a lasting positive impact on the property.

Amenities Additions

Introducing new amenities such as daycare, fitness centres, rooftop gardens, lounges, and co-working spaces to enhance tenant satisfaction and attract occupants.

Project Management

AEIs require careful planning, budgeting, and project management to ensure smooth execution and timely completion.

Regulatory Approvals

Obtaining necessary permits and approvals from local authorities for construction and modifications.

Lifecycle Considerations

AEIs should align with the property's long-term goals and consider the impact of enhancements on its overall lifecycle.

Studio X recently transformed the fortunes of an underperforming commercial property in a key location in Mongkok, Hong Kong by repositioning the retail podium.

Yau Shing Commercial Centre, a 22-storey mixed-use commercial building has a gross area of approximately 80,000 sq ft and was built in 1992. It is situated at the junction of Nelson Street and Sai Yeung Choi Street South. The podium has been occupied primarily by local F&B operators and was running at a 20% occupancy prior to the renovation and was underperforming in the market.

The brief was to redesign the podium in order to better align with the market and the Grade A buildings in its close vicinity such as Langham Place, Gala Place and The Forest and improve leasing, footfall, rents, and social sustainability.

Initial challenges included resolving the existing overcomplicated facade features that reduce the building's visual impact, enhancing the amount of internal natural light penetration, a lack of coherent advertising space, dimly-lit and uninviting internal circulation, weak shopfronts, and shop units that were not fit for purpose in terms of size and adjacency along with a lack of amenities and a missed opportunity on the roof deck.

Sam Bradley, Studio X Design Director and Hong Kong office lead, explains: “Back when we first visited the property, we could see straight away that the potential to create something really special was there. Our role extended beyond that of designers and into asset enhancement consultants for this project, and we really wanted to guide the client through the transformation and create a more appealing and functional asset for both tenants and visitors.”

Studio X helped the client team curate a diverse and attractive tenant mix from the outset in order to help focus the project around what prospective tenants might expect and to ensure the concept was focussed on an end goal that everyone could align behind whilst making sure shop units were adequately proportioned. We also wanted to ensure that we could attract a consistently high standard of retailers, restaurants, entertainment options, and community-focused businesses.

Through careful placement of a prominent corner LED screen, the client has been able to generate additional revenue and provide its tenants with an ever changing canvas to promote the latest offers and brands which now reside in the building. At 16m wide, the 3D-capable screen is one of the largest of its kind in Hong Kong.

He added: “Adaptive Reuse and Sustainable Practices are a key part of Studio X’s expertise and we are finding that many of our clients are seeking advice on how to optimise existing property or underperforming assets.” The Studio X Hong Kong office has developed a reputation for Asset Enhancement Initiatives (AEI). Bradley adds: ”We are always excited by the opportunity to peel back the layers of an underutilised existing structure and reposition it for maximum commercial potential. Particularly as this approach leads to a more considered and prudent use of materials and a reduction in building waste and environmental impact.”

It is estimated that the construction industry contributes around a third of the world's overall waste, and at least 40% of the world's carbon dioxide emissions. Building repurposing, AEI as a whole and the use of sustainable practices implemented during renovations, such as energy-efficient lighting, water-saving features, and eco-friendly building materials are a key part of a more sustainable Hong Kong, and Studio X have positioned themselves at the forefront of this niche specialism.

By strategically replanning the shop units, changing their adjacency to the street, resizing them, and making the overall space more porous, Studio X aimed to maximise the commercial potential of the building while simultaneously improving the shopping experience for customers.

Studio X’ AEI works also involved redesigning and reorganising the entire interior layout across all floors to create a more open and fluid space, better sightlines, allowing for better traffic flow and improved customer movement. This increased porosity helped draw shoppers in from the street, allowed them to more easily navigate the shopping centre and discover different shops, ultimately leading to more sales opportunities for the tenants and increased rental values.

An improved tenant mix, enhanced public spaces, and a new rooftop, encouraged people to spend more time at the shopping centre. Studio X worked in conjunction with Savills the leasing agent to ensure that the retail layout would be attractive to the prospective target tenant profile, with a key emphasis on attracting a new anchor tenant to fill the vacant podium levels. This goal was reached when two of the podium levels were taken by GU, Uniqlo’s fashion forward sub brand based on the schematic design package alone and well in advance of the building's practical completion.. Elsewhere, Savills have been able to market higher rents, improve tenant quality and fill vacant floors in the office tower above proving that a careful and considered public realm upgrade can lead to improved commercial performance across the asset and, more importantly, elongate the life cycle of the building.

The project was run to a strict budget with a commitment to managing the renovation project within a tight construction budget. Despite the ambitious vision and extensive scope of the project, the firm diligently controlled costs and implemented cost-saving measures wherever possible and conducted an extensive procurement, VE and tendering exercise to achieve this.

Studio X’s project delivery team, overseen by Bradley, employed value engineering techniques to identify cost-effective alternatives without compromising on the quality and functionality of the renovation. This approach ensured that the project stayed on track financially without sacrificing the overall vision and goals.Close collaboration between the firm, contractors, and suppliers throughout the project's duration. Effective communication and negotiation with vendors helped secure competitive pricing for materials and construction services, further contributing to cost control. While Studio X’s proactive monitoring of the construction budget and continuous assessment of the project's progress ensured that any potential budget overruns were quickly identified, and contingency plans were in place to address unforeseen challenges without derailing the project.

For more information about this project, a Case Study can be found here:

https://thisisstudiox.com/projects/yau-shing-commercial-centre

If you are a client and wish to learn more about us, then please contact us to arrange a meeting with one of our Directors in Hong Kong or Singapore::

hello@thisisstudiox.com