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Office To Accommodation: Is Converting Dormant Office Space for Residential Use the Way to Rejuvenate Town & City Centres?

As we are all aware, the COVID-19 Pandemic triggered a dramatic shift away from traditional office-based working culture. Many had thought (and some had hoped) that once the Pandemic had subsided that "normality" would resume, with a large portion of the working population returning to offices and Town and City Centres being restored to their former glory (at least to some extent) as a result. Now, four years on, it is clear that flexible and remote working practices are here to stay and the number of derelict or underutilised office spaces in Town and City Centres remains high.

At the same time, a housing crisis has been simmering in the UK. Increased demand and a lack of supply has resulted in a sharp rise in house prices in recent years, which is now causing significant affordability issues for low-mid level earners and first time buyers in particular. Although this may appear to be good news for home-owners in the short-term, it is an eminently unsustainable trend and it is imperative that the housing supply increases, as has been stressed by the new Westminster Government. It begs the questions – can at least some of these empty office spaces be put to better use in a way which addresses the aforementioned crisis while still turning a profit for private organisations?

Lloyds Bank clearly think so, recently announcing plans to convert disused office space in Pudsey, West Yorkshire into Social Housing. This redevelopment is hoped to create up to 80 new homes. While Lloyds Bank are focusing on Social Housing, there is a great opportunity for Town and City Centres to be regenerated by willing developers to provide affordable and modern living spaces for general rental or sale, potentially targeted at younger demographics, which would (with any luck) increase spending and economic prosperity within these areas in turn. 

Advantages of Office Space

  • Offices are often located in areas with strong transport links and local amenities;
  • Office prices remain relatively low due to surplus supply;
  • Owners may be willing to sell vacant premises for reasonable prices to ensure quick sales;
  • Office premises invariably require significant internal refurbishment, providing scope for conversion into high quality, bespoke residential units.

Requirements for Conversion (Currently) – Planning Permission

Planning Legislation in Scotland separates properties into 11 different 'Use Classes' e.g. business premises, houses, and shops. To change the 'Use Class', Planning Permission is often required from the local authority, subject to a limited number of exceptions. Angela Rayner, Deputy Prime Minister and Housing Secretary, has recently announced that changes will be made to Planning Legislation in England by removing "red-tape" to address the housing crisis, a move which would you would expect to be followed north of the border in due course.  

General Considerations

Budget: As well as paying the purchase and funding the building work, developers must consider the cost of a Planning Application for change of the 'Use Class' and how much Land and Buildings Transaction Tax will be payable, amongst other factors more specific to the deal in question. Building works may also include costly measures such as sound-proofing and installing thermal insulation to meet residential building standards.

Desirability to Purchasers: Developments of this kind often favour high volumes of small properties as they can be exempt from government minimum space requirements. While this may be of benefit in terms of profitability, it may not only put-off potential purchasers from a comfort perspective but further impact mortgage availability due to minimum size thresholds set by lenders.

Whether you are looking to buy or lease commercial property in Scotland or have other commercial property-related needs, our dedicated team is here to help. Contact our Commercial Property team today at 0141 221 1919 to get started on your property ventures. We take the time to understand your unique situation, address your concerns, and provide tailored solutions that make a real difference.

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