Utilising change of use legislation to create more profitability out of commercial properties

Paul Johnson, Head of Corporate Sales at Leaders Romans Group looks at the recent changes made to Permitted Development Rights and the new opportunities for owners of commercial buildings to convert their underperforming property assets into homes.

Related topics:  Planning,  Commercial,  Development
Property | Reporter
9th January 2024

PDR enables planning consent for change of use in a way that is generally quicker and less expensive than a full planning application.

PDR is only suitable in circumstances in which a building owner does not wish to make structural changes to the property – but as many commercial properties, such as hotels, are attractive, perhaps historic, buildings already designed for residential use, PDR is often an excellent solution.

Conversion to student accommodation

Another option is to convert a building into student accommodation – another sector crying out for additional bricks and mortar: research cited by the Higher Education Policy Institute suggests that there is a current shortfall of 207,000 student beds in the UK, likely to rise to 450,000 by 2025.

Again, hotels, with their shared spaces and additional facilities, are particularly well suited to the co-living lifestyle sought by students.

Also, room sizes and the inclusion of en suites tend to be better suited to student accommodation than self-contained flats. This means that a conversion may be achieved through permitted development rights.

When considering the conversion of buildings into student accommodation, city centre sites tend to be more desirable to operators than rural sites.

The challenges include convincing the council that the scheme can be managed in a way that won’t impact the existing community. It is generally easier to secure planning permission for student housing if an occupier has agreed (ie, that the development isn’t speculative), so if there’s a nominal agreement with a university or college, you can demonstrate demand and have a greater chance of winning planning consent.

Conversion to later living accommodation

A further opportunity is to convert buildings into retirement accommodation. The Mayhew Review found that the property sector is failing to adapt to the impact of an ageing population, with only around 7,000 retirement homes being built each year in contrast to the 50,000 new units needed annually.

Again, investors favour this use, because density is a key factor in the viability and profitability of any property development and with later living schemes averaging approximately 250 apartments, they are an attractive investment proposition.

The UK has much to learn from the numerous successful later living schemes in Europe and the US, many of which form part of larger suburban Build to Rent (BTR) schemes - mixed-use developments not only for the over 55s but in some cases, innovative intergenerational living projects which both support the crisis in social care while also boosting the supply of affordable housing.

Given that the 65 + population is anticipated to increase to 17.2 million by 2040, there is clearly a significant demand and supply imbalance to be resolved and so, as with student accommodation, later living accommodation is a much sought-after asset by both investors and the market, and one which can provide a good return on investment.

Furthermore, because the PDR route does not entail considerable structural changes, the option to convert the property back to its original use in the future remains.

More like this
Latest from Financial Reporter
Latest from Protection Reporter
to our newsletter

Join a community of over 20,000 landlords and property specialists and keep up-to-date with industry news and upcoming events via our newsletter.