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Retrofit debate: Office-to-residential conversions ‘a one-way journey’

Government plans to ease the conversion of disused commercial space and offices into homes were the big talking point at last week’s AJ Retrofit Awards

Justin Bere of bere:architects blasted the proposed permitted development right as ‘completely wrong’ claiming small businesses, including architects and manufacturers, would be forced out of town centres.

He said: ‘We mustn’t break up the mix. Ultimately, we will have a completely unsustainable city. No one is ever going to give up expensive residential space and give it to commercial. It’s a one-way journey.’

But Marie-Louise Dunk of Aberdeenshire-based JAM Studio said it was ‘a good idea’. She said: ‘There’s no reason spaces shouldn’t be adapted. It can change the nature of a place. For example, the City of London is a dull place at the weekend.’

Rare Architecture’s Nathalie Rozencwajg – who was commended in the AJ Women in Architecture Awards – said it was important to safeguard design standards in buildings originally intended for other uses.

She said: ‘These buildings are not fit for purpose and therefore not easy to convert. It is essential that intelligent design is applied in these cases. Well-designed conversions will set a precedent for future conversions and intelligent use of space in our dense European cities.’

Christine Humphreys of Eric Parry Architects said: ‘Office buildings don’t necessarily have opening windows…and some offices spaces would not be suitable for residences.   I hope it doesn’t encourage people to benefit from the law in the wrong way. There is concern that the change will be taken advantage of.’

ZBP-retained RIBA client adviser Paul Fletcher said: ‘BIM can show how a former office building can most effectively be retrofitted as housing through a clear understanding of what can be kept and reused, what needs to be remodelled and what new interventions are most suitable.’

Phil Kavanagh of KKE Architects said conversions could bring more life to town centres but warned removing the obstacle to developers of a planning application ‘may limit the engagement of a professional design team at the outset and therefore suppress design quality.’

WSP sustainability director Paul Toyne said: ‘In principle this is a positive move. Successful city and towns centres have always been a mixture of commercial and residential and it’s a waste not to be making use of an existing building, provided they are fit for purpose. However the challenge will be reversing the situation if demand for commercial property rises in future.

‘If the space is not available will this mean increased reliance on out of town retail parks which take activity away from city centres? Of course it’s possible that if the broadband revolution makes on-line shopping the norm this might not materialise - aside from the need for large facilities to serve the distribution of goods - but it’s an issue that can’t be ignored.’

Urban Salon director Alex Mowat said: ‘Office to residential conversions will increase the supply of housing, but perhaps not significantly as I understand that the policy is only changing A2 to Residential not B1 use to residential.  There is much less A2 use in the UK than B1 so it does not fully address the potential.’

He added: ‘It is important that all housing is well designed. Retail is often on ground floors abutting busy roads. These often do not lend themselves to good private residential.’

Richard Hopkinson of Richard Hopkinson Architects said it was a ‘good idea’.

He said: ‘Good architects will always add value to the scheme, some developers may not recognise this but this is not related to the question of conversion rather than new build.’

Patrick Michell, partner at Platform 5 Architects, said: ‘There may be a mini gold rush for developers who have been trying for some time to get change of use to residential for small contentious sites who will look to take advantage of the relaxed regulations.  It will not fix the bigger economic problems of finance for development and affordable mortgages for first time buyers.’

 He added: ‘This is likely to create work for architects as we can bring our skills to deal with the technical issues that need to be addressed with change of use as well as adding value through good design.  We have a number of clients who are likely to bring forward projects if the legislation is passed.

‘All buildings should be well designed and conversions of commercial property often have the challenges of deep floor plans and limited natural light.  Architects can bring their skills and imagination to these projects to create quality homes, adding another layer to the history of a building.’

Responding to concern over the impact to town centre high streets, he said: ‘I think councils will be quick to protect strategic areas from change of use, however there is always the danger that this policy could lead to irreversible detrimental change and conflict, when residential use becomes established alongside less compatible commercial activities. 

‘As with the “right to buy” your council house, some of the negative effects of this policy could have been limited by building more council houses; start-up businesses need small, low rent units and councils should be supportive of this type of grass roots business activity but I doubt that better located commercial units will be built to replace those being lost, hampering the recovery later on in the economic cycle.’

He added: ‘It will be interesting to see how “empty office” is described in the legislation.  Our landlord has already applied to change our office into a flat, the application was refused but there would be little to stop them evicting us at the end of our lease and converting our office.’

 

Further comment

 

Tim Morgan, director of property investment company Emerging Real Estate, said: ‘Plans to allow the conversion of disused offices into residential can only be a positive move as, not only will it actively utilise space that is currently redundant, but it will also create opportunities within the construction industry whilst meeting the demand for UK based buy-to-let investment opportunities. This demand has been created as a result of many economic factors, from renting being a favourable option due to insecurity in the workplace to interest rates remaining close to record lows, which are helping to ensure that no one is able to save very far or very fast towards a deposit to buy their first home.’

Paul Callingham, managing director of Starboard Hotels, said: ‘As an increasing number of commercial properties sit unoccupied across the UK, with an estimated 420,000 depreciating in value, the potential for change of use for many owners struggling to sell and make a return on their investment  is strongly advisable, particularly for landlords considering selling off their assets quickly. Starboard Hotels is currently working with local authorities to identify underused, disused or derelict sites, with the aim to regenerate the UK’s commercial centres, by introducing high quality affordable hostel accommodation. The intention of targeting commercial landlords will not only prove highly attractive for landlords who are struggling to sell ageing stock, but it also indicates a growing opportunity for the short to long term residential accommodation sector.

‘Following the success of our award winning hostel, Edinburgh Smart City, Starboard Hotels understands the possibilities that can come from change of use. By tailoring the principals of Edinburgh Smart City for the rest of the UK, there is great potential to rejuvenate our disused localities by attracting visitors, tourists and short-term tenants, creating a more constant demand for goods and services already provided in our commercial centres and thus assisting local businesses to survive tough economic conditions.  

‘With thousands of properties sat unoccupied and out of use across the country, it is very rewarding to work with local authorities to identify commercial properties within major city centres which could be considered for a change of use and help encourage growth on our high streets.’

James Geddes of Private Property Search said: ‘There is a definitely a trend in switching commercial back to residential across Mayfair and greater London in general. In Mayfair it is the large landlords that are looking at it as a way to balance their books as incomes are down on rents from businesses folding. If the building was originally constructed as a house then the planners have a hard time to refuse permission. It does get harder on purpose built office blocks but it does happen. Normally on these it would be a pull down and rebuild to get the most update service etc. thereby the developers can charge a premium.
 
‘There are a few examples of commercial switching to residential in Mayfair at the moment, Aldford Street at £17.5m for the freehold springs to mind on sale through Wetherell. The larger blocks or developments such as the South Audley Street car park and the old US Navy Building in Grosvenor Square that will be coming to the market in 2014 and after will be high end new developments and selling in the region of £4,000 per square foot when the rest prime Mayfair is hitting the heights at £3,000 per square foot.’

Turley Associates director Will Lingard said: ‘Whilst many landowners may see this as an ideal opportunity to deliver more new homes and get stagnating sites off the ground, I can understand why many planning departments would see this as an ill-conceived move.  The danger is taking a blanket approach to this issue.  There is a fundamental difference between London and some towns in the South East and many other parts of the UK.  Stimulating investment through residential may be critical for one, whereas losing office space in the Square Mile, for example, may have a damaging effect upon London as a financial services centre.  The government needs to appreciate that one size does not necessarily fit all.’

Adam Challis, head of research at Hamptons International said: ‘As a result of Stamp Duty changes announced in the Budget, office to residential conversions may become the preferred route for developers that want to avoid the seven per cent charge for residential sites. Offices still incur only four per cent SDLT; a huge savings on land charges. Commercial property investors are faced with increasing capital expenditure to refurbish obsolete office space and many buildings are falling well behind new sustainability standards. Investors are finding that there is better value in conversion to residential use.’ 

He added: ‘The downside of the increase in commercial to residential conversions is a slow erosion of the integrity of London’s true commercial zones, which compete globally for international businesses to locate in London and drive a large proportion of UK GDP.’

James Brown, a development viability partner at Strutt and Parker, said: ‘The Government’s proposed planning relaxation policies could and need to lead to the delivery of more housing. However, this will be subject to the amount of affordable housing and Section 106 costs which come into play via the planning system with changes of use. These obligations can make changes of use un-viable. The RICS have just released guidance on what viability means in such a context which is extremely helpful.

‘Development, and/or bringing buildings into use, should be ‘encouraged’ in a variety of ways so long as development does not cause harm. Relaxing planning rules is one way. Local taxation relief, for example, is another. If offices are not in use for good reason, changes of use to residential can only help UK town centres as “vibrancy” is re-introduced. There is nothing worse than dead or dying town centres as they are not centres. However, design and proper spatial planning will remain of paramount importance. Residential should not just be “squashed in”.’

Malcolm Chumbley, head of UK development at Cluttons, said: ‘As the severe shortage of new residential developments continues, the number of mainstream developers looking to convert office into residential space is increasing rapidly. The government has rightly recognised that this should be supported, as residents bring a new demand for services, establish an evening and weekend economy and provide support for local businesses. This is fundamentally a good thing and we are pleased it is being encouraged.

‘Moving forward, we need to build on the government’s recent announcement and work with local authorities which hold the power to enable development in their communities. The commercial reasons for office to residential conversion are too compelling to be ignored and we hope more local authorities will follow the lead of councils such as Westminster City Council, which has adopted a clearly defined pro-development planning strategy in-line with the NPPF.’

Alex Michelin of design and development company Finchatton, said: ‘The Government has made its intent very clear - to increase the supply of new housing - and it is bringing in various measures to achieve this and stimulate economic growth. One such measure is to allow disused offices to be converted into residential.

‘The impact of this is likely to be that office sites at the cheaper end of the market might disappear in favour of more lucrative residential developments because land supply, particularly in the built up areas in London, is relatively inelastic.  However, in the short term, we would question what appetite there is by house builders to increase volumes versus increase their margins, as more still needs to be done in terms of stimulating demand.

‘The Government appears to be focused on planning relaxations as the reason why homes aren’t being built, when in fact this is just one aspect of a complex housing market. Prime central London, for example, is impacted to a far greater extent by global economic movement than it is domestic and in terms of house prices, these areas are fairly immune to supply side increases elsewhere.’

Joe Burns, co-founder of development and architectural practice Oliver Burns, said: ‘In general terms the reform to planning procedures concerning a change of use from commercial to residential is a positive step and should contribute towards the urgent need to increase the rate of house building in England. This simple change of policy makes the process for planning consent much faster and offers security to developers hoping to buy redundant office buildings and obtain a change of use to residential. For decades, house building has failed to keep up with the needs of the growing population. The current rate of house building is currently at a record low, with just 129,000 new homes built between 2009 and 2010 - leaving a shortfall of 103,000 new homes per year from the current government target. This is a huge deficit in housing supply that needs to be found, so utilising redundant office buildings is a good starting point.

‘There is however one key stipulation to this policy that needs to be kept in mind if you are buying a redundant office building to convert: you can’t obtain a simple change of use if you are planning on changing the exterior of the building. If this is the case then you would still be required to submit a full planning application - this also applies if the building is listed.

‘I think the quickest way to meet the shortage in housing is for the government to release more greenfield sites. A recent Planning Inspectorate study found that only 61% of local planning authorities had a verified land supply allocation in their local plan, and reported local authority figures suggest that where a land supply is in place, it is often not targeted at the areas of greatest demand. This shows a fundamental flaw in the system, as there is no point in building new homes where they are not required.

‘A great fear of mine is that the government will take charge of the shortage in housing and opt to build huge estates and tower blocks - with no real thought given to the design or lifestyle of the residents. Experience has shown that these types of developments tend to become neglected ghettos with crime and social issues.’

 

 

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