Office to residential critics warn there’s ‘no going back’
Developers in London have responded to calls from the government for a rush on office to residential conversions, by warning that such a move could destabilise the market and would be almost impossible to rectify.
The preliminary plans - reported by Search Office Space last Wednesday – include the provision of 40,000 new residential units, converted from currently vacant or under-developed office space in prime areas, within London alone.
The move, which was announced by planning minister Nick Boles last week, has generated serious turbulence across the property sectors, with both sides vocal in their conflicting stances.
Many local councils are eager to expand their provision of affordable housing, whilst a number of commercial property developers and business leaders have argued that the development of residential stock should not come at the expense of the commercial sector, for fear it may stifle economic recovery.
In central London, the changes are likely to have a tangible effect on the property markets in financial and corporate centres including Holborn, Fleet Street, Victoria, Vauxhall, Euston, Whitechapel, Waterloo and Hammersmith. Outside the CBD, Ealing, Barnet and Hounslow will see their residential stock increase exponentially.
Nick Candy, the developer behind the residential and retail complex One Hyde Park, suspects that the proposed rate of office to residential conversions would lead to an oversupply of the latter, leading to destabilisation within the local market.
He also warns that, should the proposal be un-successful, a return to the original ratio would take up disproportionate resources in time and money, commenting: “It’s much harder to convert housing back to offices.”
The provision of luxury residential units in the capital increased by almost 70% last year, with 15,500 new homes now scheduled for completion by 2021. And, local housing associations fear that planning regulations in their current form would merely open the market up to a slew of premium housing, further alienating the affordable housing demographic.
Councils in improving commercial areas, such as Shoreditch, have sought to slow the conversion rate in order to continue growth, whilst districts with a high concentration of listed properties, such as Westminster, have been quick to highlight potential issues with the current planning regulations.
120 planning applications for office to residential conversions have been approved in Westminster over the last 12 months, up from 66 in 2008/2009.
However, Westminster council have gone on record stating that they will seek to maintain a “mix and balance of uses to protect the small-scale, lower-value building stock suitable for small and medium-sized businesses that bring vitality to an area and are the lifeblood of the economy.”
Despite such resistance, Paul Smith, partner at planning consultancy H2SO, believes that, “As long as prime residential values are about 30% more than office values, the case for conversion will remain compelling.”
This appears to be the case, with a number of developers at iconic London properties jumping the gun in converting their prime office stock. In Covent Garden, 90 Long Acre has been earmarked for conversion into 200 residential units, whilst developers at the Shell Centre on the Southbank and Tottenham Court Road’s Centre Point are planning to create 790 and 82 residential units respectively.
Elsewhere, developers Native Land are converting 83,000 sq ft at Mayfair’s landmark 30 Old Burlington Street, whilst Berkeley Homes have announced transitionary plans for 20 and 30 Albert Embankment, as well as 190 Strand.
Such disarray has resulted in a number of ironies. Firstly, residential stock in Westminster is likely to experience a significant price-hike as a result of the council’s resistance to the plans, with units at the latest development, Roman House, starting at around £565,000.
In the affluent borough of Mayfair, over 250 once residential mansions have been returned to their original usage in a trend that has gathered pace over the last two years, following the end of 50 year lease terms in the mid nineties that were typically issued in post-war Britain.
Peter Wetherell, of Mount Street Estate Agency, told the Evening Standard: “It would be a shame if Mayfair’s renewed gentrification was curtailed by a borough wide policy. Mayfair was solely residential until the early 20th century.”
“The restoration of large, beautiful houses makes so much sense as these buildings are not suitable for the needs of today’s commercial tenants. Abolishing regulations means more homes can be brought back in locations such as Albemarle Street, Dover Street, Clarges Street and Bolton Street, some of Mayfair’s oldest residential addresses.”
The one conclusion that can be drawn from such disagreements, is that in a city as diverse as London, a one-size-fits-all approach cannot be adopted.
Each region is likely to adapt their own individual attitude towards office to residential conversions as a result of the demographics they are comprised of, and such conclusions are unlikely to be drawn as quickly as the government’s plans have been announced.