In the Spring of 2013, the Government announced that regulations would be introduced to amend permitted development rights, allowing a change from office to residential use without the need for planning permission (a ‘Prior Approval’ application is still required however). This will give the opportunity for empty office blocks to be converted into residential developments, fulfilling the ever-growing need for city centre homes.
AWW director and head of the Residential Sector, Phil Bevan gives his thoughts on the scheme.
What are the timescales?
There is a three year timescale from May 2013 to May 2016. Currently the conditions are that any new-use has to be implemented by May 2016. There still needs to be clarification about whether part occupation can satisfy this requirement and it is anticipated that as we move nearer to the deadline, further updates will follow.
Why has the Government decided to implement this scheme?
There is an on-going need for residential properties in city centres, and a growing amount of unused and outdated office stock which is not fit for purpose. It seems an obvious solution as the two appear to be compatible. Due to the lack of funding during the recession, people have not been building houses recently, and so there is a pent up demand. Align this with the availability of mortgage deals and add the Government ‘Help to Buy’ scheme, and you have a recipe for success.
Quite a few cities (including Bristol) unsuccessfully applied for exemptions on the basis that they were worried that there would then lead to a shortage in office space. These cities were concerned that this would limit city centre space available for future employment.
What is the impact on Bristol where you are situated?
There has been a lot of interest in the Bristol area and we have heard that there have been around 20 applications to the Local Authority. AWW has two applications approved, and another two which are in the six to eight week process of being consented.
Not only would we be putting old office buildings to good use, but there is also an opportunity for ground floor amenities providing a more mixed-use development. Due to security, noise and privacy issues, it would be unreasonable to develop ground floor residential space in a city centre. With this in mind, in the right location there is an opportunity for new restaurants, local convenience stores and cafes etc. This can only be a good thing for Bristol.
There is also a mixed-use approach keeping office floors within the developments, which would enable the prospective retention of some of the old office space. Air quality must also be considered and in certain locations will be an issue for ground floor apartments within a city centre development. Air conditioning could provide a solution to this problem.
What impact will there be on London?
The top five residential conversion requests are in London – Richmond, Camden, Barnet, Islington and Merton. Richmond alone received 119 requests in the first six months. The London boroughs of Islington, Richmond and Camden argued the changes to planning rules could threaten swathes of their areas with economic meltdown, saying converting occupied offices to homes could force small businesses to move to peripheral areas. Residential properties in Richmond have an exceptionally high value and very limited land available for employment use so it remains to be seen what the loss of office stock will mean for places like this.
I think the most benefits will be seen in Central London where there has been a drought in new homes. Some clever architecture is going into developments being squeezed onto long-derelict sites in Soho and the Crossrail Station project at Tottenham Court Road has sparked a long-awaited residential revival. One of the most significant residential projects in the eastern end of the Oxford Street pipeline is Almacantar’s Centre Point, with consent for a £350m scheme to convert the 145,000 sq ft 1960s office block into 82 flats. I think it’s unlikely that there will be pure Office to Residential schemes but we anticipate the commercial and residential sectors are expected to benefit from the redevelopment of areas around Soho and Tottenham Court Road with high quality mixed use schemes.
Why would old office buildings be attractive as Residential properties?
The main selling point is the city centre location, proximity to key transport hubs and opportunities to provide reasonable levels of parking. However, due to the need to design around existing structures and features, apartment sizes tend to be more generous than new residential buildings and so could therefore make it more attractive to a potential resident. Price will be another important factor as the apartments are likely to be better value than new build developments.
What are some of the barriers to converting an office building to a residential scheme?
Commercial façades from the 1960’s, 70’s and 80’s are not renowned for their beautiful design. In prime locations, the external appearance will be a key value driver and ‘pavement draw’ to potential purchasers. However changes to the façade of the buildings will need separate planning permission bringing uncertainty and cost.
Our proposed refurbishment of an office building on Victoria Street, a typical1960s post war building, requires an innovative approach. We are working with the client to create and inspiring new city centre living space, altering its appearance with a new façade to move it from an outdated office building to a contemporary modern living space. The remodelling of the building also enables us to reposition the entrance, moving the main entrance from the traffic heavy main street to a quieter, more residential appropriate side street which will be more attractive to potential purchasers.
Office buildings in city centre locations tend to be fully air conditioned making conversion to residential requiring opening casements or trickle vent provision expensive to modify.
How much of it will be Affordable?
One area of residential development where conversion may be a solution to difficult capital cost viability issues is in the delivery of new Private Rented Sector (PRS) units. The viability equation for such schemes is very reliant on being low cost to build. Currently PRS schemes are not common outside of London but the affordable rent model may become more attractive with the lower cost of developing accommodation.
If the economy improves, will there then be a shortage of Office space?
Although there has been a slowdown in new office developments coming forward, the savvy occupier is very critical of the type and quality of the space that it occupies. With new factors including legislation on minimum energy ratings for offices, the introduction of key enterprise initiatives within key city locations and occupiers own sustainable policies everything is staking against tired and outdated office accommodation. Typically low floor to ceiling heights, restrictive service zones and a lack of flexibility, also support the approach of conversion to an alternative use.
New office demand will typically be supported with new development in key hub locations offering easy access to main transport infrastructure. The proportion of conversion opportunities is still relatively small leaving a good balance of Grade B office space available in city centre locations.
How will Sustainability be integrated?
Inherently, the embedded carbon efficiency of a refurbishment which recycles an existing building will be greater than a complete demolition and redevelopment.
The current new build residential standard for sustainability, Code for Sustainable Homes, is not applicable to converted buildings with PDR. This creates a potential capital cost advantage for conversion which might impact on the renewable energy strategy and water conservation requirements.
At the earliest stages in a project AWW is able to interrogate both the existing building’s performance and the new design in-house. We implement environmental software that we have helped to develop with Sefaira as part of our BIM workflow to ensure the scheme not only meets the client brief but also excels in terms of environmental performance, without adding cost (both with regard to capital and on-going running costs). We are able to quantify what impact each design decision has on the performance of the design such as understanding the impact (if any) of upgrading each individual fabric element brings to the project, allowing us to drive the best option before bolt-on renewable technologies are considered. This approach can often reduce the dependency on costly renewables to meet targets and policies, therefore delivering the most robust and cost effective overall solution.
What advice would you give to Clients?
There is a definite cost benefit of converting to residential instead of sitting on outdated office stock while waiting for the market to improve. Sales values can be £250 to £300 per sq ft (depending on location), outstripping the commercial viability of a potential refurbishment to Grade B office space.
The clock is ticking! There is a three year window which was put in place in Spring 2013. Although there is talk on the period being extended, there is no guarantee that this will happen with many unknown factors driving the Government decision. Not acting now will potentially mean that you could miss out.