A series of successful office-to-residential conversions have completed recently in towns and cities across the UK, sparking further interest from property developers and investors. With warehouses transformed into townhouses and TV centres into luxury apartments, opportunities to repurpose properties are reinvigorating the sector. However, developers must be prepared for the potential risks and manage such conversions with care.
Weighing up risk and reward
The Government’s deregulation of the planning system included a move to extend permitted development (PD) rights. As a result, developers can now demolish existing commercial properties and rebuild them as houses, without the need to secure prior planning consent.
Where large-scale property conversions are concerned, it is important to tread carefully. Altering the use of a building can be a complex and challenging task, and costs have a tendency to creep up. By utilising experts in the marketplace, such as property agents, managers can assess the long-term viability of a project before they invest.
Often, large-scale developments can take months or even years to complete, so it’s important to weigh up the proposed strategy carefully at the outset. Is repurposing the building the best option, or would it be better to demolish it and start from scratch? Does the internal layout of the building lend itself to the proposed redevelopment plan? Horizon scanning, including scenario planning, can be used to forecast any changes that could impact the project further down the line.
It is also important to consider the building’s sustainability. While retrofitting an existing building to meet today’s required energy performance standards can be tricky, the embodied carbon used when building from scratch could have a far greater cost on the environment. Depending on how much focus is given to ESG, developers may need to take this into account.
Collaboration is key
Urban conversion projects can be unpredictable and often bring additional challenges. At an early stage, considerations should be made around accessibility for suppliers to get goods vehicles onto the site, as well as space for storing materials and equipment.
Close collaboration with local authorities can help to identify factors that could slow down or impact the viability of the project. Even though planning permission may not be required, sharing any plans for development with local authorities, planners, and nearby residents could help to nip any local management issues in the bud.
By weighing up any potential risks, developers can hone their plans, set their contingency budgets, and optimise their business case, making the proposed project more attractive to potential investors.
As more repurposing opportunities come to light in the commercial property sector, developers should be ready to get involved. However, a risk-centric and collaborative approach is key to long-term success.
First published at Housebuilder & Developer