Alex Ground, Pippa Beesley and Laughlan Steer address the major planning and construction considerations for building owners and developers in refurbishment projects.
The future of the UK high street will depend on, among other things, the bold vision of landlords to optimise, diversify and innovate on the use of their buildings, so as to meet evolving consumer expectations.
This is especially important when it comes to refurbishing (or, if necessary, redeveloping) large, inefficient and often heritage buildings which are landmarks of city centre high streets across the country. Nowhere is this more challenging than in London.
Planning
Important considerations at the planning stage for large-scale non-domestic refurbishment projects have been raised by the recent case involving the proposed demolition and redevelopment of the flagship Marks & Spencer store at Marble Arch, W1. M&S’s application was subject to a call-in inquiry by the then secretary of state Michael Gove, on the grounds of the environmental and carbon impact of demolition versus retrofitting, along with other heritage factors (though the building was unlisted and not within a designated conservation area). Gove’s subsequent intervention to block the redevelopment was based on conclusions contrary to those of the inspectorate and was deemed unlawful by the High Court in March (Marks and Spencer plc v Secretary of State for Levelling Up, Housing and Communities and others [2024] EWHC 452 (Admin); [2024] EGLR 14).
Whole life cycle carbon assessments
The case brought to the fore the need to throw into the planning balance whole life cycle carbon assessments of new buildings as well as refurbs when determining whether to explore the refurbishment versus redevelopment routes. The case indicates a general direction of travel in favour – on perceived environmental grounds – of retention and retrofitting as opposed to demolition and redevelopment. The case showed, however, that demolition and redevelopment can constitute the low-carbon alternative to retrofitting, if it can be demonstrated there are substantial reductions in operational carbon to be made over the building’s life cycle that offset the embodied carbon from demolition and construction.
There is currently no guidance on how to use WLCC assessments to correctly inform and support proposals (eg must multiple WLCC assessments be commissioned for different potential retrofit and/or redevelopment options to demonstrate relative carbon benefits?). Such guidance is, arguably, the missing piece of the puzzle desperately needed within planning policy.
Extending the building lifespan
Another consideration at the planning stage is whether the approach proposed will sufficiently extend the building’s overall lifespan.
Existing design codes require new buildings to be designed in accordance with principles of the circular economy and to be adaptable to a range of occupiers over an extended 60-year lifetime. These codes are helpful to developers and promise to support the reduction of WLCC. Uncertainty arises from inconsistencies in the policy landscape. For example, it is a central principle of the National Planning Policy Framework and London Plan that developments make the most effective use of brownfield sites, and those that do not should be replaced. Again, there will be circumstances where retrofitting existing retail buildings cannot entirely fulfil this criterion, which would seem to be a compelling argument in favour of demolition. The same is arguably true for the current policy on permitted development rights regarding demolition.
It is important in this context for developers to review construction contracts to identify what they say about building lifespan and materials, particularly liability for failure of materials, as this element of construction contracts has gone through some evolution (but more on the construction side below).
There ultimately needs to be more vision and direction from policymakers to prioritise the need to build better as well as building more, so that what we do build lasts longer. Otherwise, we will go round in a vicious circle. When WLCC assessments are prepared, they include an input of lifespan of the building, and the longer the lifespan, the longer the period the carbon impact is distributed over, thus lowering it. Provided those inputs into the WLCC are robust, that is therefore a way to encourage – by “carrot”, as opposed to stick – design that ensures a longer lifespan.
Optimum viable use
From a planning perspective, the other important issue when evaluating refurbishment options is to consider what the optimum viable use will be. Planning policy does support putting heritage assets to a viable use as it is appreciated that this is likely to lead to an investment in the maintenance necessary for their long-term survival.
Decision-makers need to be convinced that firm evidence that alternative uses (which can include retaining an existing use) that might entail less harm to the significance of the heritage building have been seriously considered. Evidence needs to demonstrate that the proposed use and refurbishment works represent the only viable option. Equally, evidence needs to be provided that that current use is unviable (if a change of use is being proposed) even if it may likely be less viable than the proposed uses; the optimum viable use is the one likely to cause the least harm to the significance of the asset and may not be the most economically viable one.
Public benefits can be weighed against any harm caused, however they only come to be considered once there has been sufficient evidence that the current use is not viable and/or other alternative uses that would cause less harm to the heritage asset are also not viable.
Construction
Russell-Cooke’s real estate department advised the owner of 318 Oxford Street, Publica Properties Establishment Ltd, on the appointment of McLaren Construction to carry out the refurbishment and extension of the former flagship House of Fraser store on Oxford Street, W1. The firm worked with Publica on all contractual elements of the appointment, from draft through negotiation to completion.
The appointment of McLaren to the circa £130m contract has seen the firm undertake a full mixed-use-led redevelopment of the site, with a focus on both sensitively restoring the building’s art deco character while delivering a superior modern, flexible space which benefits from a reduced carbon footprint and enhances the surrounding area. The building is scheduled to reopen in spring 2026 under its new name – Elephant.
This is one of many large-scale refurbishment projects the team has advised on for major retail owners in the capital, and there are a number of key factors to consider when embarking on such projects.
Risk
The apportionment of risk sits at the very heart of negotiations between owner and contractor. The potential risks to a refurbishment project – particularly when dealing with a large, centrally-situated and heritage building – can be considerably higher than a new-build development. A contractor may discover potentially hazardous materials that were not known to be present in the building, such as asbestos, or, if spectacularly unlucky, unexploded ordnance on the site.
On a more practical level, design liability will be fiercely contested; woe betide the contractor that finds itself as the single point of responsibility for the employer’s design. While it is commonly believed that this is the case under the Joint Contracts Tribunal Design & Build contract suite, amendments are required to fully shore up the position. The extent to which a contractor will be willing to take on such risk will be determined by the complexity of a project’s scope and the status of the works. For instance, if the contractor has already undertaken substantial works pursuant to the letter of intent, it is unlikely to agree to being solely responsible for the overall design.
While many risks can be preempted during negotiations, it is prudent to have regular update and/or early warning meetings to mitigate the effects of any unforeseen issues.
Dispute avoidance and resolution
For domestic construction projects, adjudication is generally the preferred method of dispute resolution. It is known as “rough justice” for a reason, however. That being said, on eight, nine or perhaps even 10-figure projects, adjudication may not be a suitable means of dispute resolution for every dispute (and in many such cases, should only be used to determine discreet issues). This is because the truncated time frame is unlikely to afford an adjudicator adequate opportunity to fully examine complex claims. Domestic arbitration remains rare (and usually only occurs where a party has inadvertently selected it as the default means of dispute resolution under the building contract).
Value engineering
An important option to consider for large-scale and complex refurbishment projects is the use of value engineering to incentivise the parties to reduce costs (although in some cases, simply to improve functionality) and bring the project to completion within budget (and on time). Value engineering is also a means of increasing the sustainability of projects the scale of 318 Oxford Street and beyond. Consequently, there has generally been a move away from fixed-fee contracts for this reason. The value engineering concept has long been established in Schedule 2 of the JCT suite, so it is generally quite straightforward for parties to adopt and/or adapt for their purposes.
Reviving our city centres
While there may often be a compelling case for replacing older retail buildings, innovative refurbishments remain an essential method for regenerating city-centre shopping districts. Refurbished spaces can effectively meet both consumer tastes and habits in the digital age and evolving “green” policy requirements. Major refurbishment projects rely on many factors which can and should be considered in the planning and contract stages. While additional policy support is also desirable, overall there is the vision, ingenuity, and expertise in the market to overhaul our high streets.
Alex Ground is a partner in the planning team, Pippa Beesley is a partner and Laughlan Steer is a senior associate in the construction team at Russell-Cooke LLP
