The number of applications to municipalities to change the use of real estate from commercial to residential has increased enormously in recent years, new figures show.
Such requests, which allow buildings such as offices, shops and warehouses to be converted into homes, have increased by 63 per cent between 2021 and 2023, according to data from This is Money’s Direct Line Landlord Insurance.
It says the change is due to landlords and developers looking to capitalize on rising demand for housing.
The number of approved applications grew by 60 percent in the same period.
According to the data, obtained through a Freedom of Information request, this year’s number of change of use applications is on track to exceed last year’s figure by a further 20 percent.
Changes announced by the previous Conservative government mean that since August 1, unused commercial properties can be converted into residential homes without full planning permission.
For sale: Dexters is selling this converted apartment in Maltings Place, London Bridge, for £800,000
The research suggests this change has created ‘new opportunities’ for landlords looking for a ‘sustainable’ income.
Labor has also pledged to build 1.5 million homes in its first five years in power.
Haringey in London saw a 100 per cent increase in the number of approved applications for change of use from commercial to residential between 2021 and 2023.
At 90 per cent, Somerset saw the second highest percentage increase in approved change of use applications over the period.
Enfield, Merton, Croydon, Ealing Lewisham, Hackney, Wakefield and Bristol also made it into the top 10 locations with the highest increase in approved change of use applications over the period. The top ten includes seven London boroughs.
Sheffield and Milton Keynes saw increases of 58 per cent and 57 per cent respectively in approved change of use applications, as offices, shops and warehouses were repurposed to meet growing residential demand.
Jonny McHugh, head of landlord at Direct Line, told This is Money: ‘The property market is constantly evolving and as demand for housing continues to rise, this has increased the attractiveness of converting commercial units for domestic use.
‘By converting underutilized commercial real estate into residential units, landlords can help maintain their income streams and future-proof their investments.’
Jeremy Leaf, a north London estate agent and former chairman of Rics Residential, said: ‘One of the reasons we have seen an increase in commercial to residential conversions is likely to be the acute shortage of shares, particularly in areas with the biggest question.
‘Planning permission could be simpler and quicker for these properties than residential conversion or even new build, bearing in mind that commercial meets the ‘brownfield’ definition and should include existing infrastructure and services.’
But he cautioned that these projects may not be as easy as they first seem, especially for ambitious homebuyers without a real estate background.
Could be yours: the property on London Bridge is a split-level warehouse conversion
Spacious: The flat in London has two bedrooms, two bathrooms and a balcony
Features: The flats in The Maltings Place block are packed with features that showcase the history of the location
“Conversions are not always routine internally, depending on existing layouts and the location of things like utilities and partitions,” he said.
‘Outside space, other than on the ground floor, could also pose a significant challenge, although many could contain some beautiful ‘distressed chic’ or ‘loft style’ apartments which are often particularly attractive and valuable.’
Although the trend of converting commercial and retail properties into homes has increased significantly in recent years, there is no guarantee that this will continue any time soon.
Landlords face higher stamp duty and stricter regulations, and the costs of carrying out construction and renovation work are also high.
Buying commercial real estate and converting it into homes for people is not for the faint of heart, but it can be lucrative.
Specialist financing is likely to be required and buyers and potential landlords will need to be aware of local regulations for residential conversions.
Detailed plans and drawings must be submitted to the local authority. Fire safety and minimum space requirements should also be considered in any plans.
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