The Pandemic May Not Last Forever, but Many of Its Effects Are Here to Stay – Especially When It Comes to Home Working.
As noted by the Institute of Chartered Accountants in England and Wales, more than half of UK business directors have planned to downsize their offices during the course of the pandemic, and if working from home remains a popular choice, more and more businesses will be looking to change their workplace arrangements.
Working from home is, after all, clearly a feasible option in the eyes of many commentators. A recent report from McKinsey has pointed out that UK office workers in fields like business and financial services have the highest potential for remote work among all the countries they examined.
In practice, this means that commercial offices are becoming increasingly obsolete. Retail data consultancy Local Data Company has found that commercial office vacancy rates in London are, in fact, facing a five-year high.
But while offices around the country may be empty, the opportunities they represent for keen and creative developers and investors are brimming with potential.
Filling a Vacancy
Some groups have found unusual ways to fill up vacant commercial spaces. In parts of the US, for example, empty offices have been converted into research laboratories – 4 million square feet of space in the Northeast is already in the process of being converted according to data from CBRE.
Though labs are an unconventional option, the idea of converting that space into something more useful is exactly the right approach – and, in the UK, converting commercial offices into residential properties is a smart choice.
This is a trend that predates the pandemic: Savills reports that, since 2015, 14.4 million square feet of office floor space has been converted to residential uses, with another 37.9 million being converted across England as a whole.
Savills also points out that these new dwellings are often converted under permitted development rights (PDR), which allow for some types of work to be performed without planning permission.
It’s worth noting that the government has recently changed PDR rules to make office-to-residential conversions easier: as of August 2021, commercial and business buildings considered Class E can now be converted to Class C3 residential use without planning permission.
There’s no question that this has been a popular move against the backdrop of a new work from home culture: planning research specialists LandInsight saw a huge influx of searches on their database for office to residential conversions as soon as this news was announced – a rise of almost 700 per cent, in fact.
As far as both the government and property owners are concerned, conversions like this are clearly the answer to a world of emptier office buildings.
Solving Problems and Creating Opportunities
By converting empty offices for residential use, we are doing more than ensuring that good real estate doesn’t go to waste. These conversions have real and necessary benefits for the economy and the country at large.
As the House of Commons Library has pointed out, England requires approximately 345,000 new homes per year – whereas, in the year spanning 2019-20, only 244,000 homes were built. In other words: we need more homes.
As such, converting offices isn’t just a sound investment, but a socially responsible move that can help to address the UK’s current housing crisis – a crisis which, in turn, only enhances the lucrative possibilities that conversions hold for investors.
With recent research from Loughborough University indicating that 71 per cent of young single adults are still living with their parents in their early 20s, and 54 per cent continuing to do so even in their late 20s, the stage is set for eager young professionals, for example, to lap up new, converted housing in prime city locations that may otherwise be lacking in housing opportunities or otherwise out of reach.
Office-to-residential conversions, then, allow investors to react to the changing circumstances caused by the pandemic in a positive and proactive way. To Communities Secretary Robert Jenrick, “the conversion of unused shops into cafes, restaurants, or even new homes” can “help the high street to adapt and thrive for the future,” suggesting that such moves have strong economic implications.
At the same time, conversions provide much-needed housing to a country that isn’t quite hitting development targets, all while providing investors with a creative and lucrative way to generate capital.
Clearly, if handled well, office-to-residential conversions are a win-win situation for every party involved.