Boom in change of use from office to residential

Last year’s changes

In May 2013 the government put through a change to planning legislation which allowed developers to change the use of office property to residential use without the need for any planning permission. Politically this move scored points both as an effort to move developers’ focus away from trying to use green space to build, and to tackle claims that the current regime had failed to provide sufficient level of affordable housing. The consultation reported that that this would be a minor move with small consequences, but developers have grabbed the opportunities provided with both hands, and now there are proposals on the way for a similar move allowing retail space to be converted.

Expectations vs. reality

Once a change of use has been effected there is a requirement to notify the council. It was expected that 140 of these would be filed per year across the whole country. In reality it has been reported* that over 2,250 have been filed in the first six months alone – with the London Borough of Richmond alone receiving 140 to date. In the Borough of Croydon 33 offices would equate to around 700 homes.

Pros

This is going to mean a boost for the property market as the numbers represent substantial activity from developers. The numbers also stack up in favour of new buyers; the figures in Croydon alone suggest that there will be new flats in central locations hitting the market in the coming years. For those already installed, the effect of revitalising disused and potentially out dated or low quality office spaces could represent an improvement in the character of their area.

Cons

There is a question mark over why so many offices weren’t redeveloped before the legislation came in. The suspicion is that these new applications are in respect of buildings which would not have been fit or appropriate for residential use and would have been shot down if planning permission were required.

For commercial tenants the decrease in supply of office space is going to increase demand and potentially drive up prices. Those in affected areas will need to take a careful look at the market before their next break date or rent review comes around.

There is also an issue that the supply of office space is finite in central locations, meaning the boost given to housing is most definitely short term exclusively – this is by no means a long term solution to the problems of affordable housing.

The new proposals.

There are currently proposals to allow a similar change, only this would permit the conversion of shops to residences, making use of the much touted empty retail units in high streets. This would be subject to a fast tracked version of planning permission, and the proposals are currently expected to come into force early in 2014. Beyond the arguments that this will contribute to the ‘death’ of the high street by reducing the amount of shops, there is also a potential issue that councils have had some control taken away from them by the existing measures and the new measures would mean they have little control over the consistency of their town centres. There is potential that councils may take a hard line wherever possible and obstruct the planned “fast tracked” procedure in order to keep their desired balance in central locations.

*The figures used in this article are based on the results of a freedom of information request published in the Estates Gazette magazine on the 11th January 2014.

For more information contact Yildiz Betez