Hybrid properties offer opportunities for investors

Photo: SRV/Arkkitehti

An illustration of the Redi hybrid complex being built in the Kalasatama area of Helsinki, Finland. The front features the REDI shopping centre that opened for business on 20 September 2018. Source: SRV/Architect

What is a hybrid property? They seem to be popping up everywhere in the Helsinki metropolitan area. Redi in Kalasatama and the Mall of Tripla in Pasila are two examples of large-scale hybrid projects. Including hybrid buildings in city planning supports the objective of a varied and vibrant city structure that features city centres with service networks. Notable hybrid building projects are ongoing and more will come as urban infill and as the intended use of buildings changes. The Building as a Service concept will slowly replace the conventional building-centric model, where the value is based on the building and its durability and usability. The service concept only puts an instrumental value on the building – the focus is on the service experience of the customer. Hybrid buildings serve an important role in developing service networks and lively urban environments. As working life, the use of workspaces and even living habits and housing types change, the change in city structure is accelerated and requires a new sort of thinking for all of the built environment. Multi-purpose hybrid properties are challenging and require good cooperation between the different operators, but they also offer new opportunities for investors, developers and their partners.

Hybrid projects link functions together

The word "hybrid" is a fashionable one and can be tacked on to almost anything. As a term, "hybrid" refers to a combination of things that becomes a new entity. Hybrid building is the building of different spaces and functions as one unit, where the cohesion of the different functions is essential, whereas the functions in mixed use properties are mutually independent. To qualify as a hybrid, buildings must have at least three significant functions that have notable interaction both functionally and physically.

Hybrid building is now a worldwide phenomenon. The megatrends of urbanisation, climate change, population ageing and rapid technological development have contributed to hybrid buildings becoming more common. There are a number of large hybrid projects in progress in the Helsinki metropolitan area where business premises, offices, living space and different private and public services join together in a coherent city space.

In hybrid buildings, the different functions are interconnected and cannot be separated without the whole suffering. Source: What is hybrid building? 9/2015 by mmpak


Vital role in city development

These days we strive for a more compact city structure where housing, services and workplaces all mesh together. By combining different functions into one unit, we can aim to create lively urban environments, enhance land use and meet sustainable development targets. Hybrid buildings should meet those needs that are related to interaction and the flow of people's everyday lives.

As working life, the use of workspaces and even living habits and housing types change, the change in city structure is accelerated and requires a new sort of thinking for all of the built environment. Supporting individual and innovative solutions and including the citizens is a step towards more functional and comfortable city spaces.

Having a central and attractive location is highly important for hybrid projects. Users moving in a hybrid building should find it just as easy as navigating a street. The signage used should be clear and help the viewer perceive the space quickly and effortlessly, both in the horizontal and the vertical.

Housing will guarantee that hybrid buildings are used round the clock, promoting interaction in urban environments. Shared spaces will further improve the utilisation rate of the whole building. As things currently stand, we pay too little attention to the management and attractiveness of lounges, courtyards and street space. Abroad, hybrid buildings often feature comfortable green areas and carefully managed outdoor areas. In a sense, hybrid complexes are cities within a city.

An illustration of Redi, the heart of Kalasatama, with its high-rise housing. Source: SRV/Architect

Investors find hybrid properties to be a complex affair, interest remains low

Investors usually focus on certain types of real estate, but this may lead to missed opportunities. Hybrid properties have different investors for each function. Very rarely will an investor invest in the entire hybrid complex, which may contain housing, retail shops, restaurants and offices, to name some examples. Multi-purpose hybrid buildings can offer higher profit than housing or office space alone without raising the risk by much. The different functions can complement each other: while housing will have a lower risk of vacancy and provide a stable cash flow, business premises can be turned into lucrative lease agreements. For institutional and other big investors, singular commercial and office buildings are often too small with regard to the immediate costs of building management and maintenance, among other things. Hybrid buildings, still relatively unknown, can provide a better alternative in this case with scale and synergy benefits that can be utilised for financial gain. Instead of several operators managing their function of choice, the investor can manage and develop the property as a whole.

The necessity of three-dimensional property formation

Hybrid projects are demanding to implement in a compact city structure, as the permits, ownership structures and techniques required are complex and time-consuming. The projects often involve multiple parties, which calls for plenty of coordination. Currently, only two-dimensional property forming is possible in Finland. Three-dimensional or 3D property forming is much needed, especially in city centres. A proposed legal amendment would enable the forming of 3D land registry units above and below grade in zoned areas. The objective is to make it simpler and more flexible to execute large and multi-level construction projects by allowing the property to be divided vertically, which would make things easier for real estate investors. The amendment was intended to come into effect on 1 August 2018.

Flexible spaces for changing housing and working needs

The functional requirements for both housing and working have increased in recent years. Flexible solutions are expected for changing space needs. Germany, with its long history of hybrid building, has office spaces that can be divided into homes or converted into commercial spaces. Housing and working can be clearly separated or effortlessly combined. Modularity allows multiple units to be connected horizontally or even vertically. The nature and organisation of work are undergoing a radical transformation, which should be taken into consideration in construction. An increasing number of specialists are either entrepreneurs or otherwise self-employed. When work becomes independent of place and time, more flexibility will be called for in working conditions. Spaces must be customisable, resizable, divisible and serve multiple purposes.

Retta Management manages several properties which have the characteristics of a hybrid property.  Ask more about our services: Heidi Joutsenkunnas, Tel. +358 40 517 5919.

Writer: Irma Jokinen, Reasearch Manager, Retta Group


Hallituksen esitys HE 205/2017 Government proposal for 3D property law
Vertical Cities – Moving in Hybrid Buildings, master's thesis by Ulla Tikkanen
Hybrid Model in Office Building Renovation, bachelor's thesis by Matias Virkamäki