The Daily Telegraph - Saturday - Money
Teach an old shop new tricks – and make a profit
Martin Gaine became an accidental property developer when the pandemic left his office empty. Here’s how to do your own conversion
My team of planning consultants loved working from home so much during last year’s lockdowns that it quickly became a permanent arrangement. Which was incon ven ient, because I had just bought a bicycle shop in Surbiton, south-west London, with grand plans to use it as a trendy new office for my company, complete with beanbags, table football and free coffee.
Luckily, there was a profitable way out of my empty property problem: the Government had just relaxed the planning rules to more easily allow the conversion of defunct commercial premises into new homes.
The old bicycle shop is now a quirky two-bedroom cottage – and has unexpectedly boosted profits at Just Planning, my consultancy.
I was an accidental property developer, but I had been telling clients for months that the pending reforms were a rare opportunity for landlords to breathe new life into vacant units and for newbie developers to break into the business. Empty shops and offices are a legacy of the pandemic, their prices are depressed and they are relatively cheap and straightforward to convert. This is especially the case compared to building a whole new house. A shop conversion is the perfect first propertydevelopment project.
The new permitted development rights allow the conversion of most commercial premises ( shops, restaurants, banks, offices, gyms, crèches, clinics and workshops) into new homes.
There are a few rules: they must have been in one of these specified qualifying uses for at least two years and must have been vacant for at least three months (to stop unscrupulous developers turfing out viable businesses). The new homes must meet the national minimum size standards (an internal area of at least 398 sq ft/37 sq metres) and enjoy decent levels of natural light. The premises can’t be listed or in a national park or an Area of Outstanding Natural Beauty, but they can be in a conservation area.
Full planning permission is not required, but developers must still apply for “prior approval”, a kind of light-touch application in which only a few issues – mainly flooding, contamination and parking – can be considered.
This bonfire of red tape is a boon to smaller or newbie developers, who struggle to provide the reams of paperwork ( tree reports, ecology surveys, affordable housing statements) usually required for full planning applications. Since there are relatively few things that a council can assess in a prior approval application, there are relatively few things that can go wrong.
Of course, planning is just part of the process and shop conversions take some care and imagination to get right: not all commercial premises make good homes. Avoid shops on busy streets – no one wants to live between a bookmaker and a fried- chicken shop. Some units are narrow, deep and dark, and have little or no outside space (the kiss of death in the post-pandemic housing market).
Design is key, said Jo Gale of Dexters estate agents. “Homebuyers can be suspicious of commercial conversions, so spend extra time on the design and the details – a good architect and designer will work wonders with awkward spaces”.
The actual building works to convert a shop or an office are quite straightforward, said Danny Rowe of builder West Space London, who converted the bicycle shop. “The building is already there and most commercial properties are well insulated, structurally sound and supplied with water and electricity. The rest is largely cosmetic,” he said. Mr Rowe recommended budgeting £150 per sq ft in the South East and £90 elsewhere in the country, due to varying construction costs. Conversions are generally quicker and easier than newbuilds, and a gentler introduction to development for newbies.
If you are looking for a conversion project, choose something quirky, recommended Katherine Mahoney, of Inner Pieces, an interior designer. “Some commercial buildings have real charm and, if sensitively converted, preserving original features and using materials and colours true to the original, can sell at a premium,” she said.
At the bike shop, she was inspired by its industrial character – the shopfront was retained, the original flooring restored and the steel Crittall-style windows brought back to life.
“Buyers like to see a combination of the old and the new,” she said, “so we paired the best of the original building with the usual mod cons: sliding doors
to the garden, a large kitchen island and luxurious bathroom fittings.”
Commercial conversions can generate juicy profits. Vacant commercial premises are usually valued at a large discount compared to fully tenanted premises and to houses and flats. The bicycle shop was marketed for sale at £267,500, or about £300 per sq ft; houses in the same area command about £700 per sq ft.
The converted bike shop is now on the market for £650,000 through Dexters. The conversion costs were about £160 per sq ft (a total of £150,000) and there were other miscellaneous costs and fees totalling £50,000. The gross profit is about £ 180,000, a return of 28pc on the final development value.
‘Empty shops are a legacy of the pandemic and are easy to convert’