Opportunity through Obsolescence

Research paper by JLL (2025) | Retrofitting, Information, Technology

Curator: Alexandra Faciu

Montréal, Canada

This post is accessible to all readers.

Why we recommend it: This publication provides a thorough analysis of obsolescence and its main drivers, offering strategic advice to protect asset value and enhance portfolio resilience. In light of evolving market demands and increasing uncertainty, revitalization strategies must place a premium on financial returns, regulatory compliance, tenant needs, and enhanced visibility. Investors are increasingly drawn to sustainable, future-ready assets that align with urban and policy trends. Smart technologies and data analytics are enhancing performance and tenant experience, while retrofitting, repurposing, and conversions are proving vital for resilience and competitive advantage.

Key takeaways:

- Commercial real estate that has reached the end of its useful life faces several challenges. These challenges are present in all asset types and regions. The challenges include operational inefficiencies, a market shift toward higher-quality properties and a mismatch between existing buildings and demand for investment-grade assets. In the current business environment, sustainability and climate risk mitigation are becoming increasingly important factors in asset valuation. Given that approximately 80% of today's buildings are expected to remain in use through to 2050, it is essential that thorough, forward-looking strategies to preserve and enhance value are implemented.

- While the initial costs and capital requirements of repositioning strategies may be significant, they can ultimately generate substantial returns and mitigate the risk of obsolescence. Depending on market conditions, economic trends and location, retrofits or conversions can become core, value-add or opportunistic assets with greater resilience. With almost $600 billion in global dry powder, early investment in upgrading assets to modern standards offers a significant competitive advantage.

- Key repositioning and redevelopment strategies for at-risk assets and portfolios:

• “The drivers of stranding risk vary substantially across asset classes and geographies.” In the context of obsolescence, there are three key dimensions to consider – functionality, location, and regulations. Across these dimensions, six overarching themes stand out: enhancing building adaptability, integrating building systems, fostering urban experiences and enhancing connectivity, navigating property market dynamics, shaping land use policy, and addressing sustainability requirements.

• “There is no one size fits all approach to investment.” Intervention strategies range from minor refurbishments and light retrofits to deep retrofits and full or partial changes in use. While more extensive interventions often result in greater value increases, they also involve higher risks and are more sensitive to market conditions.

• “Strategic retrofitting, most notably comprehensive energy upgrades that are aligned with the characteristics of the building’s superstructure, is key to future-proofing real estate assets.” This strategy opens up new avenues for investment, especially in areas that are witnessing rapid automation, increased AI integration, and heightened sensitivity to fluctuating energy prices.

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