During the pandemic, the trend of converting unused commercial properties into residential homes really took off.
However, now that many businesses have instructed employees to return to the office, has this trend passed or is it here to stay? Brokers have discussed their experiences within the current market.
Not a fleeting phenomenon
Kundan Bhaduri (pictured left), property developer and portfolio landlord at The Kushman Group, said the trend of converting commercial properties into residential units is not a fleeting phenomenon.
“It is a fundamental shift in property development that is firmly rooted in economic and societal changes,” he said.
The convergence of factors such as changing work patterns, increased demand for affordable housing, and the surplus of underused commercial spaces, Bhaduri said, had created a perfect storm for this trend to thrive.
As remote work becomes more normal and traditional office spaces face reduced demand, he added that the appeal of residential units in well-located commercial structures continues to grow.
“Former pubs, high-street shops, office spaces, and even former bank buildings, all offer the potential for conversion into modern apartments,” Bhaduri said.
He added that the need for innovative solutions to address the current housing shortage makes these conversions a logical and sustainable choice for the future.
Austyn Johnson, founder at Mortgages For Actors, agreed with Bhaduri and added that commercial conversions to residential homes are still proving extremely popular.
“Developers are finding well priced properties in towns and cities that offer decent potential as multi-units or HMOs,” he said.
With many of these properties close to public transport links, Johnson said they are a good prospect for young professionals and people who work locally. In fact, Johnson said, since COVID, this type of deal has popped up more often, due to businesses being forced to sell up.
Reduced frequency
Alastair Hoyne (pictured right), chief executive at Finanze, said enquiries for commercial to residential finance applications are still coming through, albeit at a less frequent pace than they were a couple of years ago during the pandemic era.
“When the rules surrounding General Permitted Development Order (GPDO) were amended in 2021, there was a surge in enquiries over the following 12 months, as this gave developers more choice due to the increased availability of properties they were able to convert with minimum red tape surrounding planning permissions,” he said.
Most of the enquiries during this time, Hoyne said, were office to residential apartment schemes, which came with uncertainty surrounding people returning to work in town or city centres.
“Things have definitely slowed over the course of this year as more offices and businesses have re-opened their doors, but the market is still there and provides developers with an alternative option,” Hoyne said.
Omer Mehmet, managing director at Trinity Finance, said there are still a number of permitted development rights that developers can enjoy to convert commercial to residential property.
“The most frequent we see used is the class MA to convert from commercial use class E to residential; this most often presents itself as the conversion of the upper or rear parts of a shop into flats,” he said.
With the UK being so far behind its house building targets, he can only see it as natural progression that more residential homes are created in and among the high-street, albeit at a slower pace than in 2020.
“The pandemic accelerated the number of vacant commercial shops, and so increased the attractiveness of taking low value commercial buildings and converting them into higher value residential ones,” Mehmet said.
His view is that busy high-streets will remain buoyant but over time the empty and derelict ones will get fully converted to residential properties.
source: mpamagdotcom