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Planning portal - The conversion of office space to new housing

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Using empty offices for homes makes sense – and the government knows it, says Arita Morris

As part of the government’s plan to simplify the planning system and drive growth, one area that has been overshadowed by the debate surrounding the National Planning Policy Framework is the separate proposal to extend permitted development rights to allow offices and other commercial properties to be converted into residences.

Irrespective of legislative changes, the move is a timely reminder of the potential that redundant office space has to provide much-needed new housing. Child Graddon Lewis has published a report analysing the impact and opportunities of the government’s proposals, prepared with Nathaniel Lichfield & Partners, Robinson Low Francis, Ramboll, with the NHBC as advisory partner.

Child Graddon Lewis has converted numerous office spaces to homes over the past 22 years. There have, however, been circumstances where these schemes have encountered barriers from local policy on the protection of employment space.

Some local authorities, and in particular the City of London, are rightly worried about the loss of employment space and the quality of residential accommodation that comes from these conversions. There is also concern about the delivery of affordable housing, which as a consequence would be outside developers’ remits. Ultimately, it appears that the government will follow a ‘softer’ policy approach and include a presumption in favour of change of use, while allowing local authorities the opportunity to assess design, quality and delivery of affordable housing.

Government figures suggest that changing disused commercial properties into residential could create as many as 22,000 new homes, although variations in location, building suitability and financial viability are likely to lower this number.

The areas with the greatest opportunities are in established centres or residential environments, particularly around central London and the south-east. Regional town and city centres such as Bristol, Harrogate, Norwich and Southampton also provide opportunities, given their current under-supply of housing and projected increases in households.

But does the business case make sense? Average land values put residential land at over £1.8 million per hectare, commercial at around £700,000 and industrial fractionally lower at £600,000, acquiring land currently used for commercial or light industrial use is the cheaper option. These four cost scenarios illustrate the possibilities:

  • Upgrading an older commercial building to current standards and requirements
  • Converting to residential to existing regulations
  • Converting to residential to 2013 regulations
  • An equivalent new-build residential development.

Office upgrades, unsurprisingly, are cheapest, at around £1,400 per square metre. A residential conversion to Part L 2010 would cost around £1,600, and to Part L 2013, £1,700. Then comes the biggest hike: an equivalent new-build development would cost around £2,200.

How such conversions will take place is dependent on several factors. Many urban centres have reached full capacity due to previous high-density residential development and mortgage rationing. Precise location is everything for post-completion saleability, ruling out a lot of current commercial buildings. Equally, family-sized homes are less likely to be accommodated.

The results of the government’s consultation are still to be announced. Yet even while there are suggestions that a softer policy approach may be a preferred option, the presumption in favour of sustainable development outlined in the NPPF, should provide a useful starting point for developers and their advisors seeking to unlock vacant buildings.

Arita Morris, associate director, Child Graddon Lewis. Download Departments to Apartments at www.cgluk.com

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