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Completely London

London property market blog


/ by Richard Sayer

Are the new rules governing commercial to residential change of use good news for all?

The introduction of the commercial to residential planning changes should in theory help to provide more new homes across the country, while addressing the issue of empty office blocks which cannot be let. With councils previously not particularly keen on such a change of use, many applications were denied unless developers could prove that the building had been properly marketed for years without any interest. Now, many of these redundant office buildings appear to have a greater value, but as always, there are pitfalls that should be considered.

While planning permission might not be required, developers will find that they are still required to deal with the Planning Authority where the ‘Prior Approval Regime’ is concerned. Here the Local Authority can request additional information in support of the change of use to residential which will mainly be related to the impact on transport, safety hazard zones, flood risk areas and land contamination. So if the property sits within one of these risky areas, they may find that the automatic consent is not quite so forthcoming.

Secondly, planning consent is still required for any proposed external alterations and with many of these empty office blocks requiring an external facelift, developers may find this mired in red tape. Of course, the Government’s focus on getting the property market moving is commendable and the recent introduction of the Funding for Lending and Help to Buy initiatives are having a positive effect on the residential market. However, with lending such a core consideration, it’s concerning to note that some banks consider these homes risky and may not grant mortgages as a result.

For councils, the new rules could potentially spell bad news. No longer will they find themselves on the receiving end of Section 106 funding which was previously a condition of planning permission.

Without this funding we’ll likely see a negative impact on local infrastructure and public services which are already stretched from government cost saving measures. Social and low cost housing, which were also conditions of the planning consent for high density schemes, will also suffer. Developers have never been keen on the inclusion of such housing and without it being a necessity they will likely provide a residential mix of their own making.

Finally and perhaps most importantly for the commercial office market is that the reduction in offices could result in less employment opportunities and permanent loss of employment land in the Boroughs concerned. By reducing office supply we’ll likely see an increase in rents on the remaining office blocks.

While the overall initiative seems to be a positive one, brought about as a result of listening to what housebuilders need to get the market moving, the changes were not supported by most councils and it remains to be seen what effect these new regulations will have over the next few years.

About our expert View all posts by this expert

Expert Richard Sayer
Richard Sayer Senior Commercial Surveyor at KFH
Richard has worked at KFH since October 2012. He has over 22 years' commercial property experience primarily in the disposal and acquisition of commercial premises within the M25. When not working, Richard is keen on cookery, football and travelling.

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