Converting offices to residential – now no need for planning permission!

In most parts of the country there is a significant difference in the value of town centre secondary offices, compared with those which can be realised through residential conversion. In our area we are seeing vacant 1960’s and 70’s offices being sold for between £50 and £100 per square foot whilst residential figures are typically £175 to £200 per square foot.

The extent by which these new provisions will be exploited remains to be seen but there are a number of issues that owners of offices accommodation should take into account in deciding whether to convert their premises to residential use:

1) Financial Viability

The starting point is naturally an assessment of the value of the premises as offices compared against residential conversion. As referred to above there is usually a large potential increase in value to be realised. However in order to obtain an accurate viability assessment it is essential that careful consideration is given to all of the associated development costs, with appropriate allowances made for  building works,  finance, fees etc.  Holding costs including empty business rates and insurance should also be taken into account.

2) Statutory Requirements

Although these new rules avoid affordable housing obligations, Community Infrastructure Levy (CIL) may be applicable in some circumstances and planning permission is likely to be required for any external changes to the property.  An application to the local authority also has to be made to establish whether prior approval is required in relation to transport and highways impacts, contamination or flooding risk.  It is important to note that these new provisions do not apply to Listed buildings and some local authorities are exempt, albeit none are within our region. Building Regulations will also apply to all conversion works in the usual way.

3) Funding

The ability to fund a speculative conversion may require investigation.  Lenders are generally more willing to fund residential development than commercial, although it may be perceived that there is more risk attached to conversion.

4) Timing

These new rules currently only apply until 30 May 2016 and there is no saying whether they are likely to be extended.

For further information and advice in the first instance, please contact either Alistair Mitchell DDI 01473 417714 / agm@fennwright.co.uk or Lewis Chambers DDI 01206 216562 / lcc@fennwright.co.uk.