Converting office space to residential – what are the issues?

The UK housing shortage shows no signs of abating despite the government’s stated target of building 300,000 new homes a year. Solutions must be found and, interestingly, existing office space could offer a way forward.

Even before the COVID-19 outbreak took over the world, many forward-thinking businesses and tech start-ups began to question the 9-5 working model, preferring more flexible working patterns for their teams. Enter the pandemic, and commercial property quickly became one of the worst affected sectors with underutilised and empty office space in London and beyond.

Fast forward a couple of years and it seems that working from home and new hybrid working practices have established themselves as part of the ‘new normal’ while many businesses are reviewing their need for existing floor space in office buildings.

As landlords are seeking alternative uses for properties that were hitherto used as commercial office space, there’s an emerging trend for this space to be converted into residential units as a way to maximise the returns on property assets. Take John Lewis, for instance, who recently revealed the first three store locations to be turned into rental homes. They’ve committed to deliver 10,000 homes in the next 10 years as part of a long-term plan for 40% of the company’s profits to come from non-retail by 2030.

Commercial property owners and investors have more support than ever before if they wish to convert office to residential space, thanks to recent changes to permitted development rights. So, what does this mean and how does it work?

What is Permitted Development?

Permitted Development Rights (PDR) were originally introduced by the government in 2013 as a scheme to allow certain home renovations or extensions without the need for a full planning application. PDR regulations were expanded in 2020 for homes in England and also for bigger projects.

Crucially, these planning changes include new rules for major developments such as turning commercial premises (including offices and shops) into residential units. In other words, converting office space into residential space has become much more viable.

What are the PDR rules for office-to-residential conversions?

Certain regulations must be met in order to convert office space to home under permitted development rights, the key ones being:

  • The gross interior area of any new converted residential unit must be no less than 37 square metres.
  • All residential developments must adhere to regulations regarding adequate natural light to be received in the new dwelling.

Of course, office premises were never designed with residential use in mind, which has prompted some critics to question whether residential conversions of former office buildings can ever be fit for purpose. In order to deliver suitable, attractive and profitable housing in this way, it is therefore critical to think carefully about how to approach the conversion project and enlist the right expertise from the very start in order to achieve a successful scheme. This includes a consideration of the following key points:

  • Will the residential conversion comply with regulations for housing space standards in terms of size and layout?
  • Will the conversion from office to new residential development meet the basic standards for natural light and sufficient ventilation?
  • Will all rooms in the dwellings converted from commercial space be built to sufficient quality for habitable space?
  • Are the new homes thus created situated in an appropriate location, and are there any amenities in the vicinity?

Is planning permission or ‘prior approval’ needed for office-to-residential conversions?

In most cases, building conversions that are carried out under PDR won’t need planning consent, however, they may need ‘prior approval’. Any developer should check with their local authority if Article 4 (prior approval) applies to the site earmarked for residential conversion well before the start of any actual building works. Failure to gain ‘prior approval’ could see the development rejected and formal planning permission needing to be granted.

An application for ‘prior approval’ must include a full set of detailed plans, a transport & highways impact survey, a noise report and a floor risks/contamination assessment. Once all documentation has been supplied, the local planning authority cannot impose further planning policies and has 56 days in which to reach a decision. Approval will be granted if no objections arise from the application. This means that the office building can be converted into residential dwellings without the need for a formal planning consent application.

Which relevant PDR changes were introduced in 2021?

Another permitted development right was formally introduced in March 2021 and is known as Class MA to allow for the change of use from Class E buildings (commercial, business and service use class) to Class C3 (residential) use, opening up further opportunities for commercial property owners.

As a result of these changes to PDR, most commercial premises can now be converted to housing. The state purpose of the change in the legislation is to support the delivery of new housing, to regenerate the high street and to help economic recovery from the pandemic.

What PDR restrictions are there for office-to-residential conversions?

The majority of commercial space can now be converted to dwellings without the need to apply for planning consent. However, the following restrictions apply:

  • The building to be converted must have been a Class E building for at least two years before it can qualify for permitted development. Time served in other commercial use classes such as A1 (retail) and D1 (non-residential institutions) can count towards the two-year qualifying period.
  • The building to be converted must have been vacant for 3+ months before an application for ‘prior approval’ is made. Any time spent closed because of the government’s COVID-19 restrictions will not count towards the qualifying period.
  • Permitted development rights are suspended for designated listed buildings or any building mentioned in Article 2 of the General Permitted Development Order, such as National Parks and AONBs.
  • All residential dwellings that are developed and delivered as part of an office-to-residential conversion project must meet all nationally described standards and officially required regulations.

Written by Agency Express guest writer Annie Button