Follow us
Select Page

Office-to-residential conversion just got even bigger

by | Feb 19, 2018

As regular readers of this blog will know, we at CBRE like to keep our eyes on the deployment of the office-to-residential permitted development right introduced by the Government (in England) in May 2013. Here’s an update.

I’ve blogged before about this policy, and its effects, in reporting on our work for the British Council for Offices.

The latest DCLG statistics show that 17,751 homes were delivered via the rights in 2016-17. This in itself is quite a startling number, because it’s 38% up on the 12,824 homes delivered the previous year. Furthermore, the proportion of total housing completions arising from permitted development rights has also gone up, from 7.8% to 9.8%. Any other housing policy that delivered such a big and accelerating contribution to new housing in one year would normally be hailed as a total triumph.

There are, however, grounds for caution.

  • We only have data on this source of housing completions for the last two years, and any good analyst will tell you that ‘two data points don’t make a trend’. When we look back, 2016-17 might therefore simply have been an unusually strong year.
  • The big increase in housing completions flies in the face of the contrary evidence that the number of notifications (of the intention to draw down the rights) to local authorities has gradually been falling. The contradiction might be explained by the idea that developers are delivering schemes which they notified some time ago, and that we are currently experiencing a bulge in housing delivery from permitted development rights which isn’t going to be sustained.
  • Many commentators have expressed doubts about the quality of the homes provided, with many more worrying about the loss of office stock.

It’s possible to infer office floorspace losses from these housing gains. CBRE has previously assumed that housing units converted from office space were 75 square metres (807 square feet) in size. Thus, in 2015-16, we argued that about 10.4m square feet of office space had being lost to housing.

However, separate research by Ramidus Consulting for the Greater London Authority’s London Office Panel, using data from the London Development Database, showed that (at least in London), the figure was likely to be closer to 61 square metres. This figure was the median for London as a whole, with a range of between 37 (Haringey) and 122 (Westminster) square metres.

This suggests that CBRE’s estimates, for London at least, might have overstated the scale of conversions by up to 20%, and that the loss in 2015-16 was closer to 8.3m square feet.

However, even if we take the lower figure of 61 square metre as our assumption for dwelling size for the whole of England, the equivalent office space loss for 2016-17 would be 11.6m square feet in one year (that’s equivalent to ten office blocks the size of Canary Wharf’s One Canada Square).

It is quite difficult to believe that this is anything other than the biggest volume of office space converted to homes since records began.

Regional office market expectations in 2019

Regional office market expectations in 2019

2018 was an outstanding year of office take-up across the UK regional and SE office markets. Can 2019 reach the same dizzying heights? CBRE’s new UK Office Property Perspective reveals record breaking take-up activity (of nearly 7.5 million sq ft) in...

Smarter Cities 2025

Smarter Cities 2025

The term “smart” can be a prefix for a whole host of things: phones, motorways, tickets, cards, buildings.  And also cities, many of which are making concerted attempts to become smarter as a way of generating a range of economic, social, cultural and...

UK offices: the return of the public sector

UK offices: the return of the public sector

Over the past three years, HMRC have taken over 2.2 million sq ft of new office space across 11 regional centres. But have these deals been pivotal to the success of the UK regional office markets or have they simply added to the already growing...

Financial services: why we can bank on London

Financial services: why we can bank on London

CBRE’s latest London report ‘Why we can bank on London’ explores the three key challenges facing the financial sector: Brexit, changing regulation and the growing influence of fintech. The UK is the most specialised major economy in financial services...

Flexible financiers: don’t assume that flex space is off-limits for the banks

UK Residential investment 2017 review