Further boost for the office to residential ‘craze’

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Under the banner of its ‘Red Tape Challenge’ and attempts to streamline the planning process, the Government launched its technical consultation on planning reforms in July 2014. One of the most significant suggestions is that permitted development (PD) rights for certain changes of use will be extended, to “help ensure the planning system is proportionate and a planning application is only required where this is genuinely justified”.

Proposed changes
First, it is suggested that existing PD rights allowing offices to be converted into new homes should be made permanent. Having been introduced temporarily in May 2013, the change of use from office (Use Class B1(a)) to residential (C3) would be permitted beyond the original 30 May 2016 expiry date. Developers would have until May 2019 to complete conversions. Existing exemptions for areas the government consider to be ‘strategically important’ are also to be removed. Ministers had previously exempted 33 areas across 17 local authorities, following representations on the adverse impact on employment. While a new prior approval process would have to be followed, analysing the potential impact of losing the office accommodation, this would open opportunities in locations such as central London. Conversion of offices in the City, Westminster and surrounding boroughs to ‘exclusive’ residential use could resultantly arise.

Secondly, new PD rights may be established to allow the creation of homes in buildings used for light industry B1(c)), and warehousing (B8) – provided they were in use as such at the time of the 2014 Budget (19 March 2014). This would be subject to a prior approval process on flooding, highways, transport and contamination impacts, as with the existing B1(a) to C3 PD. Giving consideration to the impact of the proposed residential use on neighbouring industrial and employment uses may also form part of the prior approval requirements going forward.
In addition, launderettes, casinos, nightclubs and amusement arcades (that is, buildings currently under ‘sui generis’ use) in use as at 19 March 2014 will also possibly be able to change to residential use. However, the consultation does query whether there should be:

  • a prior approval process vis-a-vis design and external appearance
  • an upper limit on the amount of floor space that can be converted.

On the ground
Since their introduction in May 2013, there has already been considerable use of the ‘office-to-resi’ PD rights. An Estates Gazette report in late summer 2014 highlighted that the combined number of applications (including conversions involving both demolition and refurbishment of offices) in the capital had approximately doubled since the new rights were introduced. Applications for conversion by refurbishment had increased over tenfold, with almost 90 per cent of central London applications being made through the new PD rights.

A number of local planning authorities initially appeared reluctant to grant prior approval. In July 2014, an analysis of appeals to The Planning Inspectorate showed that at least 42 appeals (equating to in excess of 600 homes) had been lodged against Councils’ decisions to refuse applications under the new rules. In a written ministerial statement in February 2014, Planning Minister Nick Boles had commented that some authorities “do not appear to have applied the correctly intended tests [for prior approval]”.

However, LPAs now increasingly seem to be giving the ‘green light’ to PD conversion applications. For instance, Camden Council recently granted permission for conversion of a North London five-storey warehouse to 85 apartments. Although prior approval was only granted on 28 August, work has already commenced on-site. The Planning Inspectorate similarly appears to be showing its support for office-to-home conversions. An application for conversion of 75 homes by Perfect Estates Limited was refused by Bromley Council in March 2014, with the impact on transport and infrastructure cited as concerns. However Inspector C J Leigh allowed the subsequent appeal and granted permission, finding no evidence to support the Council’s objections.

WM comment
Ongoing expansion by the main supermarket chains into the convenience and high-street sectors does mean that some of the infrastructure needed to support these conversions exists. However, whether other adequate provisions are in place remains to be seen. In some cases a building’s surroundings may just not be sufficient to sustain residency, particularly when accompanied by the absence of any sense of ‘community’ that is likely. Notably, office conversions are not open to the imposition of obligations under section 106 of the Town and Country Planning Act 1990. This means infrastructure and/or provision of affordable housing cannot be funded via developer contributions, unlike with a new-build development.

The extension of PD rights also runs somewhat contrary to the Government’s localism agenda, via which it has expressed the intention to return planning decision-making to a local level – both via LPAs’ determinations and regard being given to Local Plans developed by neighbourhood forums.

With the report on the technical consultation not expected until late 2014, it will be interesting to see what changes are implemented as a result. It does appear the Government is making concerted efforts to ensure the planning system does not unnecessarily obstruct fulfilment of the country’s ever-increasing housing needs, with a determined commitment to boosting housing supply going forward. Whether this will help or hinder economic growth though remains to be seen, with the associated loss of scarce employment space that could also result. The ideal scenario would be for high-quality office space in central business districts to be safeguarded, while low-quality office space that is under- or completely un-used is converted. Stringent assessment of physical feasibility and financial viability is needed to ensure realistic development is undertaken, of which obtaining planning permission is only a relatively minor element. The ‘bridge’ between ideal and reality, however, is always a difficult one to cross.