Planning permission changes for office to residential: The impact one year on
It has been one year since planning permission changes were enacted allowing empty office space to be converted to residential housing. Manchester City Council, conscious of the limited amount of office space in the city centre, quickly applied for an exemption, but what has been the impact on Greater Manchester as a whole?
Not much, really.
Very few schemes have taken this route, for a number of reasons – and it is unlikely that more will follow as those very same reasons are, and will still be, present in the market.
According to our research, 212 new homes have been delivered via this route in the seven local authorities. And almost half of those have come forward in Trafford. As the graph below shows, in the other authorities the impact has been very modest.
By contrast, in January 2014 the Estates Gazette identified that there had been 399 notifications (individual buildings but not the resulting number of actual homes) in just five London boroughs.
One of the key issues for the lack of appetite for conversions in the Manchester city region is that, Manchester city centre apart, there is no established market for apartments in the areas of Greater Manchester that have available surplus office space. For example, demand for offices is weak in Stockport leading to a number of empty buildings – on the face of it, perfect for conversion to flats. But there is little appetite for or history of town centre living in Stockport.
The size and shape of the building is also a factor – large, square shaped buildings often can’t be efficiently converted.
The final considerations are the value of the building in a new form and the asset management strategy followed by the property owner. To justify the transition from offices to housing, the residential scheme has to be more valuable than the building remaining as offices. Offices and residential units are also very different types of asset classes. Residential units are traditionally sold immediately and profits realised, while offices are usually held as a long-term investment.
Despite the lack of activity in Greater Manchester, the change in planning is still very welcome. The shortage of housing is a national crisis and – like the Manchester Velodrome-based GB cycling team has proven – the accumulation of marginal gains can be a powerful tool in achieving objectives.
And although the market hasn’t been right in Manchester city region for conversions so far, that is not to say it won't change in the future. The edge of Manchester city centre is starting to see an apartment market return, while locations close to Metrolink stops (especially in South Manchester) are continuing to enjoy strong apartment markets. Manchester City Council will continue to protect the office stock in the city centre, but there are a number of commercial buildings which could work extremely well if they were converted to take advantage of the rising demand in these areas.
So ‘not much, really’ is an adequate summation of the impact of the planning changes one year on. But next year it might be revised upward. ‘A bit’, maybe.
Why do you think the impact of the change has been relatively modest? Let us know in the comments below, or send us your thoughts via Twitter.
And if you own or are looking to buy an office building that you think might be better suited as residential, get in touch and we can provide strategic advice to help make sure you maximise the benefit!
A version of this blog original appeared in Greater Manchester Business Week magazine on 5 June 2014.