Guest blog by Steve Hardwick, Technical Director, Gateway Surveyors
Since 2013, a significant number of offices (including mine!) have been converted into flats under permitted development rights (PDR). Over the last year, of course, most of us have had no choice but to move from working in an office to working from home. In many cases though, even after the pandemic is over, this will continue even if only on a part-time basis. What then will happen to those buildings that no longer remain viable as offices? Some will undoubtedly be converted to other uses, including residential.
Some office to residential developments have worked really well, where the office building was already of more residential appearance (for example brick walls/tiled roof) and/or in an area where there was established residential use with decent access to shops, schools, and other amenities. Other conversions have worked less well, both in terms of location and appearance, and the units have ended up as predominantly buy-to-let/renter propositions, as serviced flats, or even as aparthotels. The appetite for lending on these conversions has diminished quite markedly over the last year. Something that may have been acceptable for residential mortgage in say 2018 is no longer acceptable. With that, of course, comes increased risk and concern about future re-sale and value.
What should lenders be wary of?
- Light Industrial/Retail/Business Parks, or where commercial/retail/business use predominates.
- Limited access to shops/schools/transport and other amenities.
- Adjoining uses detrimental to ‘quiet enjoyment’ of a residential property.
- Demand disproportionately in favour of BTL/investment as opposed to owner occupation
- Unacceptable construction in relation to broader lender criteria
- Elements of construction not having a 60 year+ durability
- Combustible cladding/deleterious materials
- EPC rating not within A to E
- No warranty
- No external space (balcony/terrace/garden)
- The building still looks like an office!
City centre conversions are especially difficult to assess now. They may meet current lender criteria but, moving forwards, will buyers be looking to live in city centre locations with easy access to an office that may no longer exist?
Farther out in some of the town centre ‘close to station’ locations, is having a 45-minute train connection to London going to be as important as it was little more than a year ago? A lot of buyers, aware that they can (and will be allowed) to work from home in future are looking further afield where they can buy a house with larger outside space and more rooms. In addition, will the units currently set aside for planned use as town and city centre restaurants, shops, and bars be fully occupied if adjoining offices are vacant?
Lifestyle changes and changes of personal and family priorities as a result of Covid19 will, I believe, have long term implications and I think it is reasonable to assume that city and town centre flats, whether newly built or newly converted, will not maintain the same levels of demand and value as we progress through the 2020’s.
The views, opinions and positions expressed within guest blogs are those of the authors and do not necessarily represent those of the BSA.