Turning Boardrooms into Bedrooms: Why Office to Residential Conversion is on the Increase

Repurposing and converting office space aren’t new concepts; city-dwellers are increasingly seeing mixed-use developments incorporating everything from gyms to restaurants, cinemas to shops. It’s long been part of city-centre planning to ensure the local amenities match the balance of office and residential buildings in a given space.

In light of the global health pandemic as a result of Covid-19, however, the very purpose of office buildings is being tested.  Working patterns have fundamentally shifted to a blend of home and flexible work, with the office no longer acting as the primary destination for day-to-day delivery unless there are critical infrastructure reasons that require it to be.  With the demand for office space declining, building owners are increasingly looking at other options to maximise their bricks and mortar investment.  Residential, or specifically high-end luxury city living, could possibly be the answer.

Why consider an office to residential conversion?

Property in the UK continues to be in high demand with buyers and investors coming to the market in droves. A recently published survey from the Royal Institute of Chartered Surveyors (RICS) showed house price growth hit an 18-year high in September, with all metrics remaining strong.

Demand for premium office space, however, is rapidly declining as a result of the interruption to demand from tenants and the sharp fall in investment interest.  Many global companies are thinking about how much central city office space they want in the future, and many are delaying commitment to new and bigger space whilst they see how recovery pans out.

Despite this, the annual costs associated with running an office building continue to accrue and with no tenants, it falls on the investors to ensure continuity of payment.  By converting some of the building footprint into residential apartments, running costs can quickly be recouped with the added benefit of future building subsidy from the ongoing sale or rental income.

What about planning permission?

Deregulation means planning permission is on the side of the developer, with the introduction of permitted development rights giving a clear path to converting from an office to residential space.  Since the launch of this legislative change, over 60,000 homes have been created from office space spanning the breadth of social housing to luxury penthouse-style apartments.

Since 2013, a new ‘Class O Permitted Development Right’ (PDR), has allowed developers to convert office buildings to residential use without acquiring planning permission. Developers may only need to gain ‘Prior Approval’ before starting work and the only time planning permission will be needed is when exterior modifications will change the use of the property.

What is prior approval?

There are still cases of property conversion which require Prior Approval to be obtained. This is a procedure of the Local Planning Authority (LPA) to secure matters relating to:

• Parking and highways
• Flooding
• Contaminated land
• The impact of the repurposing proposal on the sustainability of the market in the area.

This means an application for prior approval should include a full set of drawings and supporting documents relating to the transport and highway impacts, contamination risks, flood risks and noise.

If a building complies with the prior approval mechanism, further planning policies cannot be applied when determining the prior approval application. A proven formula to convert offices into homes is all that is needed.

Are Building Regulations still relevant?

Any conversion work must still comply with Building Regulations, but developers are able to influence important issues such as internal or external space, exposure to daylight, external noise, air quality and location.  In the areas that are covered by the building regulations, conversions are often subject to lower requirements than newly built homes.

What if the building is listed?

A listed building is exempt from the devolved planning process and would need to go through the full planning permission process.  It’s possible that the LPA might also request full architectural drawings showing the proposed conversion.  In this scenario, it’s also worth understanding that work may need to be completed to a specified standard and require more expensive materials.

An empty building benefits no one so considering how vacant space could be flexibly adapted to meet an already-available demand such as housing is pushing at an open door.  With already established infrastructure and local amenities, many office buildings are perfectly placed to provide high-volume housing, whether for high-end, high-specification apartments or by adopting a more flexible shared-living approach for students with individual bedrooms and shared facilities and living space.  

Despite a simpler planning system to support building conversion, it’s still a complex and involved process and so professional support from the likes of solicitors, building surveyors and architects is key to ensure that the right decisions are made before any physical building work starts.  When it does, the process can take place with little or no disruption to existing tenants of a building and can be completed in increasingly quick timescales.

City living isn’t for everyone but for those seeking the experience, there’s a certain charm and appeal to the more industrial vibe that can only be achieved through buying a converted property.  From an investment perspective, and for those with a property that faces a bleak future as an empty space, it’s a conversation worth starting.