Space odyssey: the risks and rewards of retrofit

Retrofit might not be new, but it’s going through a purple patch due to net zero concerns. CN asks how contractors are mitigating the risks on cut-and-carve projects

It’s a bright summer’s day and Bam Construction is busy installing period furniture at a striking 1960s central London modernist office block (see box below). The firm is on the last leg of its £110m cut-and-carve job at Space House in Covent Garden. Tyler Goodwin, chief executive of project developer Seaforth Land, points at a gash in the wall where a radiator has been ripped out. “We’ve deliberately left the scars,” he says. “If you clean it up and take it away, you lose that authenticity that reminds businesses why they want to be here.”

“We’ve deliberately left the scars. If you clean it up and take it away, you lose that authenticity”

Tyler Goodwin, Seaforth Land

Goodwin is not alone in seeing the value of old buildings. Ged Simmonds, managing director of Mace’s private sector business unit, has noticed more and more of these types of projects landing on his desk over the past five years. He says retrofit projects may soon account for half of his portfolio, which focuses on central London office, residential and mixed-use schemes. “Retrofit is not new,” he says. “I’ve done refurbishment projects over my entire career – what has changed is the volume.”

The London commercial market abounds with major refurbishment projects due to increasing concerns from planning authorities over the carbon emissions produced from demolition and rebuild solutions.

A mile west of Space House, McLaren and Faithdean are performing extensive surgery on two Oxford Street retail titans – the ex-Topshop at 214 and the former House of Fraser store at 318. To the south, Multiplex is reworking a brutalist landmark – the former IBM headquarters on the South Bank. And a mile to the east, Mace is stripping the former BT headquarters back to its skeleton.

“The more information you can give clients and contractors at the earliest stage, the more sensibly they can agree on a price”

Mark Tillett, Heyne Tillett Steel

But it isn’t straightforward for contractors to jump on the trend. Compared to demolition and rebuild, there are far more unknowns to consider when retrofitting an existing building. Such complexity can prove an unattractive prospect for an industry that relies on price and timeline certainty. Both Buckingham and Tolent blamed their collapses last year on problem jobs, showing how contractors can suffer heavily from a project gone wrong. Against a backdrop of price rises and supply chain insolvencies, why add possible retrofit issues like RAAC, asbestos or flammable material into the mix?

Be prepared

For contractors who want to take on the challenge, there are a few options to limit their exposure to delays and cost rises. One is to gather as much information on the existing building as possible through extensive surveying. “Contractors won’t take on blind risk,” says Mark Tillett, founding director of structural engineer Heyne Tillett Steel. “The onus is really on us, the consultants, to do the research. The more information you can give [clients and contractors] at the earliest stage, the more sensibly they can agree on a price.”

The importance of this early-stage surveying and design work lends itself to two-stage contracting, says Morgan Sindall’s London area director Richard Dobson. Surveys can be risky, especially more intrusive ones, so if a client asks a contractor to carry one out they are likely to formalise the arrangement in a preconstruction services agreement. “You want to make sure that those risks are understood by everybody and passed down effectively,” says Dobson. “The way to do that is through a collaborative procurement route.”

“Over the past 30 years building control has been increasingly privatised. All the design information can often disappear”

Gareth Atkinson, Civic Engineers

Mace often uses two-stage contracting for major projects, but the system has proved particularly useful for refurbishment work as it allows the firm to gather as much information as possible before committing to the full build. “If we take on contractual responsibility, we have to be able to define the level of associated risk, otherwise it’s a pure gamble,” says Simmonds. “We maximise opportunities for surveying during the tendering and qualify the bid around what we find. Then, during the preconstruction phase, we deal with the issues we flagged by further intrusive surveys once the building becomes more available.”

Overall, Mace will conduct around 100 surveys on a retrofit project – checking the building against drawings, coring concrete to test its strength, and measuring the gauge of exposed steel. Surveys are also crucial for working out technical challenges unique to refurbishment projects. Dobson points out that buildings are now expected to perform to higher standards across multiple areas – fire safety, heat loss and weather performance, for example. There is no guarantee a building constructed decades ago can be easily adapted to fit modern needs, but there is some flexibility within building regulations. “In a significant retrofit there is a requirement to significantly improve a building’s performance, but you wouldn’t be required to bring it absolutely up to today’s standards,” he says.

Change of use is also a common feature in refurbishment projects, as asset owners look to adapt buildings to suit changing demand. But not all struggling high-street retail destinations can easily be converted into in-demand laboratory space, for example. Contractors have little say in such decisions, says Dobson, but should be honest about their capacity to carry out tricky conversions in the early planning and surveying stages.

Small steps

Morgan Sindall often tests out a change on a small section of the building – a roof repair or window replacement, perhaps – to discover what might happen when such works are repeated across the whole project. They might even do riskier structural alterations during the preconstruction phase, to take them off the critical path when the main works contract is in effect. “The benefit is that if you come across problems, you’ve got more time to go away and design a solution than when you have a full juggernaut of a construction project going,” Dobson says. “The industry can solve pretty much anything, it just needs the time to do it.”

Thorough preparation might help contractors anticipate problems but it can never eliminate risk entirely, warns Gareth Atkinson, director at Civic Engineers. There are a few reasons it might be hard to get the information that contractors need. “Over the past 30 years building control has been increasingly privatised,” he says. “All the design information that used to be stored in one place now sits with private companies and can often disappear.”

Even if there are records, they may not have documented every potential hazard. Asbestos is a particular danger, Atkinson says. It may not feature in building plans if it was added during a later renovation. In addition, it tends to lurk where only the most intrusive surveys will find it, within wall insulation or wrapped around pipes.

Early surveys might also be limited by access problems, Dobson adds. The kinds of buildings ripe for a deep refurbishment – such as tenanted offices, public buildings, schools – all tend to want to keep inhabitants in place for as long as possible before construction starts. “There’s a little bit of tension there,” says Dobson. Also, more intrusive surveys might cause a collapse or create a public health risk by disturbing asbestos or exposing lead paint.

Liability options

To mitigate the risks, contractors can negotiate with clients to limit their liability when things go wrong. They might choose to include some leeway for remediating mishaps in their bid price.

Jamie Leonard, partner at law firm Devonshires, says contractors can make use of provisional sums when tendering, giving a ballpark figure for how much it might cost to remediate unknown defects. They can also ask the client for loss and expense provisions for defects not identified at the outset, for example a few weeks’ grace after completion where the client cannot claim for liquidated and ascertained damages.

Another option is to specify what the contractor is liable for in the contract and specification documents. “If I was acting on behalf of the contractor I would probably push for a JCT Intermediate contract with design, and limit the contractor’s design portion so that it’s only responsible for the design it carries out,” Leonard says. “I certainly wouldn’t want to take any responsibility for any latent defects or any prior design work carried out on the existing structure.”

However, Eleanor Stirrett, partner at law firm Brabners, warns that clients are unlikely to favour this approach, especially if the contractor has taken charge of the de-risking surveys in the preconstruction phase. “When you enter into the main contract for the work, an employer might say, ‘I’ve already paid you to identify all the nasties – the risk is now yours’.”

If undiscovered defects impact the retrofit, contractors might be able to shift liability to the surveyor for failing to perform their role properly. But both contractor and client would need to show they acted correctly on their end. “It would come down to whether or not the surveyor actually missed it or it just didn’t form part of their job,” Stirrett adds.

Leonard warns that taller refurbishment projects risk additional delays under the government’s new building safety regime. If a contractor runs into a problem and has to change tack mid-construction, work has to stop immediately to pass statutory checks by the government’s new Building Safety Regulator (BSR).

The BSR is meant to take six weeks to approve work on an existing building, but Leonard says he’s seen approval times longer than that as the new body finds its feet. There is currently no mechanism built into contracts to cope with the BSR stipulations, he says. But Leonard adds that contractors should be able to programme such delays into the timeline when negotiating with the client. “Assuming the contractor has done everything it should have done to secure that approval, it’ll be entitled to [an extension of time] for however long the BSR takes,” he says. To stay on the safe side, Leonard advises contractors to define the scope of what the contractor has to do to get BSR approval in the early-stage agreement or in the specification documents appended to it.