Carry on converting

13/08/2015

Roy Turner, Property Team

To help stimulate the building of much needed homes the government back in 2013 introduced Permitted Development Rights (PDR), allowing developers to convert redundant offices into homes without planning permission.

Carry on converting

The government intends this measure to be temporary, and it will expire in May 2016.

There are some areas exempt from the policy, such as The City of London and parts of Camden and Hackney, where local authorities successfully argued there would be a threat to the economic/business fabric of the area if restrictions on office to residential conversions were loosened.

The initiative has been a tremendous success, enabling the transformation of vacant office buildings into homes in many of our towns and cities. Due to the delay and complexity, this would not have happened if developers had to go through the normal planning process.

Allowing PDR has been particularly helpful to niche developers, making smaller projects viable, boosting housing supply where it is much needed as well as bolstering employment.

However, critics of the PDR office to residential policy point out that in some cities, such as London, the loss of office space through residential conversion has helped push up commercial rents to an unacceptable level. 

But this view is based on a misconception of the policy. The offices converted under the scheme are obsolete commercial buildings which fail to meet today’s business needs, and the vast majority of them had become vacant. Many were built from the 50s through to even the early 90s. It also applies to buildings that were grand townhouses, which following the flight of the middle classes after the Second World War from the UK’s city centres, were converted to offices. Today, they are unsuited to business and history has turned full circle as they are now reverting to their original purpose as a residential address.

Another positive aspect of the policy is sustainability. Converting redundant offices to new homes gives new life to structures that took much in terms of energy and material resources to create.  Even taking account of the resources to convert the property, it is usually far more environmentally efficient to re-use rather than demolish and build new homes from scratch.

Concerning the accusation that the conversion of offices to residential has put a squeeze on office rents by reducing supply, this is somewhat of a red herring. Because of dropping occupier demand and rents in the wake of the financial crisis, new office development dried up. Rising rents have now made the supply of new office buildings viable and will help close the gap between future supply and demand.

The government up to now has not indicated that it will extend Permitted Development Rights for office to residential conversion. But looking at the ongoing housing crisis and the need to create conditions to encourage the building of new homes to help solve it, we suggest that this successful policy should be allowed to continue.


 

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