The Specification Trap

Capital, capital everywhere. Nor any drop to invest in real estate.
Spend some time at property events in London right now, and it’s the same frustration: the city isn’t struggling to attract capital. But property is.

For a beleaguered industry facing high financing and construction costs, you would think retrofit is the obvious choice. It can lower capex, shorten development programmes, and reduce planning risk.

But it isn’t.

Enter the specification trap.

In commercial real estate, assets are often optimised against established specifications, with market performance expected to follow: BCO benchmarks, ceiling heights, fresh air, and all the bells and whistles of “best-in-class”.

Standards, by definition, well… standardise. They underpin a proposition but they aren't themselves one. When they become the main basis of asset positioning, they homogenise the offer. We end up spending more to compete on the same metrics, whilst leaving ourselves less scope to influence what the market may be willing to pay.

For retrofit, that can mean spending away its advantages just to resemble new-build.

Worse, the sustainability narrative too often becomes the entire leasing narrative. But banging on about carbon savings in the marketing leaves the market as excited as a child receiving clothes for Christmas.

What if we’re competing on the wrong terms altogether?

Consumer brands condition market demand. They shape perception, aspiration and identity. People aren’t paying six figures for a Birkin solely because of its leather specification or volumetric capacity.

If market expectations are partly constructed, then competitive advantage can come from changing what the market values, not merely optimising what conventional benchmarks measure.

Capital assets can also be positioned around how they are perceived, valued and chosen by the market as much as how they are specified. That positioning anchors their design, brand and leasing narrative.

Because if existing buildings are positioned as propositions the market desires and is willing to pay more for, reuse becomes a stronger investment decision. That means reframing occupier and investor perceptions: from “second-hand” to an object of desire.

Before committing more capital to feed the specification trap, consider how much of your resource is going into improving supply, and how much into shaping market demand. Development viability depends on both cost and income. So why not work on both sides of the equation?