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    At Home In The Office

    Tim Whitmey, Director London Residential Development reveals a new type of office conversion.

    The disparity between commercial and residential values in London has created a new development trend – the conversion of redundant offices into apartments. In the borough of Westminster alone an estimated 4 million sq ft of office space has become residential in the past decade. The trend is escalating, with niche developers like Amazon Properties, Brooks Place Properties and Dukelease now specialising in office conversions. In the next few years some iconic buildings, including the US Embassy and Centrepoint, are set to be converted.

    The government appears to be in favour of the move. Chancellor George Osborne has gone on record saying the estimated 9% of office space that is lying empty across the UK could be turned into as many as 250,000 homes by 2026. His administration now wants to relax the current planning laws to make it much easier for developers to win consent for office conversions.

    However, the momentum is not unstoppable and investors should be aware of the technical, commercial and political obstacles that can make conversions expensive and sometimes unfeasible.

    The physical dimensions of offices mean very few can be converted to homes on a simple storey-for-storey basis. Offices that were built more than 30 years ago usually have low ceilings, while modern buildings tend to have tall ceilings packed with air conditioning equipment. Both can make the space expensive to convert.

    It’s also worth bearing in mind that not every borough in London is keen to see the loss of office accommodation. In fact, some are actively resisting the idea.

    The City of London has made the running on the opposition to conversion, arguing that its status as a global financial services centre could be jeopardised if no “spare” office space is available when the economic recovery appears.

    Finally, some industry analysts believe potential conversions have fallen victim to political infighting. Planning authorities, which are unhappy at reduced government funding, fear the relaxation of planning laws would mean that future conversions would no longer require consent. As a result, there would be fewer “planning gain” payments by developers, of the kind that typically provided funding for local projects, such as social housing.

    These obstacles haven’t deterred investment interest in office conversions, especially as demand for prime London residential stock remains high. But they certainly add unique challenges. That’s why it’s essential for investors to select the right building in the best location, having put in place the appropriate financing.

     
     

    Key contacts

    Tim Whitmey

    Tim Whitmey

    Director
    Central London Residential Development

    Savills Margaret Street

    +44 (0) 20 7409 9999

    +44 (0) 20 7409 9999