Val­ues key in drive to con­vert high street to homes

The Govern­ment has re­laxed plan­ning rules to en­cour­age change of use for com­mer­cial prop­erty but how ef­fec­tive will it be? Sharon Dale re­ports.

Yorkshire Post - Property - - PROPERTY -

AN AT­TEMPT to in­crease hous­ing stock while solv­ing the prob­lem of empty shops and of­fices has re­sulted in plan­ning reg­u­la­tions be­ing re­laxed.

The Govern­ment re­cently changed rules on per­mit­ted de­vel­op­ment rights for the next three years to make it eas­ier to con­vert of­fices into homes and the same will soon ap­ply to re­tail premises.

Plan­ning Min­is­ter Nick Boles be­lieves that lo­cal au­thor­i­ties should con­cen­trate on pre­serv­ing their prime shop­ping streets, while shops in strug­gling ar­eas could be con­verted to houses and flats.

His lat­est pro­pos­als to make change of use eas­ier could help tackle the UK’s hous­ing short­age and re­duce the amount of green­field land needed for build­ing.

He says: “Peo­ple’s shop­ping habits are chang­ing very fast as a re­sult of the rise in in­ter­net shop­ping and changes in life­styles and work­ing pat­terns. We need to think cre­atively about how to help town cen­tres thrive in this new era. We want to en­cour­age lo­cal coun­cils to con­cen­trate re­tail ac­tiv­ity into the prime shop­ping streets in the heart of their town cen­tres and adopt a more re­laxed ap­proach to un­der-used re­tail frontages.”

The swap from com­mer­cial to res­i­den­tial sounds like a good idea in prin­ci­ple. There are empty and half-filled of­fice blocks in town and city cen­tres thanks to a com­bi­na­tion of re­ces­sion, home work­ing and a move to cheaper, edge-of-town sites.

Mean­while, spend­ing in town cen­tre shops has fallen over the past decade and one-third of high streets are classed as de­gen­er­at­ing or fail­ing.

The is­sue is whether the num­bers stack up and, ac­cord­ing to Sav­ills, they may not for of­fice con­ver­sions in the North.

“The three-year ex­emp­tion will be wel­come news for some de­vel­op­ers and own­ers of va­cant of­fice space, es­pe­cially if the Sec­tion 106 re­quire­ment to de­liver af­ford­able hous­ing along­side any scheme no longer ap­plies.

“The re­moval of the 106 agree­ment could dou­ble the po­ten­tial of­fice to res­i­den­tial value in cen­tral Lon­don and pro­vide a real in­cen­tive to con­vert of­fices to homes in other cities,” Mat Oak­ley, di­rec­tor of Sav­ills re­search.

But, Sav­ills warn that this pol­icy change will only bring for­ward new homes through con­ver­sions in lo­ca­tions where res­i­den­tial val­ues are much higher than of­fice val­ues.

The firm’s anal­y­sis re­veals a North/South di­vide and shows that con­ver­sion is not al­ways a vi­able op­tion.

A study of eight lo­ca­tions sug­gests that while there may be some op­por­tu­ni­ties for con­ver­sion to prime res­i­den­tial use in Manch­ester and Leeds, vi­a­bil­ity is mar­ginal, with Birm­ing­ham of­fer­ing a po­ten­tial up­lift of just £75 per square foot. At this level, vi­a­bil­ity would be un­der­mined by the costs of con­ver­sion, which would to­tal at least £100 per square foot, even with­out the costs as­so­ci­ated with the plan­ning process.

“This would be par­tic­u­larly tested if a change of use were to trig­ger Com­mu­nity In­fra­struc­ture charges, notably where of­fices have been empty for over six months.

“The great­est value up­lift will gen­er­ally be in the South and lo­ca­tions such as Cam­bridge, where lev­els of eco­nomic ac­tiv­ity and home owner eq­uity mean con­ver­sion is al­ready vi­able, as­sum­ing the avail­abil­ity of stock in lo­ca­tions suit­able for res­i­den­tial,” says Mat Oak­ley.

“We ex­pect a rip­ple of new of­fice to res­i­den­tial con­ver­sions, par­tic­u­larly if af­ford­able hous­ing re­quire­ments are lifted. But in lo­ca­tions where res­i­den­tial val­ues and mar­ket ac­tiv­ity are still heav­ily sup­pressed, cau­tion will quickly dis­place en­thu­si­asm. It re­mains to be seen how lenders will view such con­ver­sions. Early con­ver­sa­tions sug­gest a will­ing­ness to con­sider projects in Lon­don and the South East.”

Mark John­son, of plan­ning con­sul­tants John­son Brook, adds: “Any­thing that sim­pli­fies the plan­ning process is good news al­though I’m not con­vinced th­ese changes will make much dif­fer­ence in the North. The ma­jor­ity of city cen­tre grade B of­fice build­ings are not suit­able for con­ver­sion and nor are most in­dus­trial build­ings.”

Busi­ness premises that were orig­i­nally res­i­den­tial tend to be eas­ier to covert.

Pe­riod townhouses are a good ex­am­ple and may well ap­peal to owner oc­cu­piers, though listed build­ings are not in­cluded in the three-year win­dow of op­por­tu­nity. As for an easy change of use for shops the same due dili­gence ap­plies.

Con­ver­sion costs are likely to be high. Frontages may need chang­ing along with wiring and sus­pended ceil­ings. Get an ar­chi­tect to look at how suc­cess­ful a new lay­out would be and ask an es­tate agent to give you a rough es­ti­mate on how much the prop­erty might be worth when con­verted.

Pubs in good lo­ca­tions can also make great homes and there looks set to be lots of op­por­tu­ni­ties to buy.

The Good Pub Guide 2014 pre­dicts that up to 4,000 li­censed premises are at risk of clos­ing over the next 12 months.

SMART MOVE: Seam­less ex­ten­sions have cre­ated a large, coun­try home that is filled with light. The ex­tra space and vil­lage lo­ca­tion made it an ideal place to bring up a fam­ily. The vil­lage of Bor­rowby is close to the A19 near Thirsk, which links to the...

NEW LOOK: To tackle the prob­lem of empty high street shops and of­fices, new plan­ning rules could make it eas­ier to con­vert them to homes.

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