In Spring 2013, as one of their objectives to simplify the planning system and with a view to delivering new homes and jobs following the recession, the Coalition Government implemented proposals to introduce permitted development rights to allow offices to be converted to residential without the need for planning permission. The proposals are currently for a period of 3 years until May 2016 at which point they will be reviewed.
Objections to the proposals included the loss of office space would limit the supply of jobs in the city centre and damage the economy.
It has taken some time for developers and speculators to grasp the nettle which is probably due to some nervousness after a historic oversupply of city centre apartments built prior to the recession. There are at least 5 buildings coming forward in Norwich which will see the conversion of about 130,000 sq ft from office to residential accommodation. How can this meet the government’s objectives of creating jobs?
There is currently nearly 600,000 sq ft of vacant office space in Norwich, of which only about 10% is “Grade A”. The buildings that have been sold for conversion were a liability to their owners; they are dated, have been vacant for some time and are costly in terms of maintenance and perhaps more importantly empty rates.
Because of this the, owners are willing to off load their liability at a price significantly lower than would be expected for an office investment if it were let, or to an owner occupier if it is vacant. The conversion of these buildings to residential is expensive and in order to make the development viable the buildings have been sold for less than a quarter of their value should there be tenant or owner occupier demand. The problem is very often that demand hasn’t been there.
Converting these redundant offices will bring people to the city centre. The reduction in office supply should eventually encourage developers to build new offices or convert more viable office space such that the supply of offices that people actually want to work in is sufficient to encourage new companies and jobs to the area.
A review of the policy in 2016 is important as we would not wish the pendulum to swing the other way again to an over-supply of apartments. There are more buildings ripe for conversion. However developers need to be aware that the change of use currently needs to be implemented by May 2016, which means development must be complete and residential units occupied by that date. Unless there is clear direction soon that there will be an extension this tight timescale will discourage developers to take the risk in the meantime.