The coalition government is looking to relax planning restrictions that govern the conversion of offices into buildings which will eventually have a residential purpose, according to Henry Lancaster, a senior investment analyst at Coutts.
Eric Pickles, the communities secretary, made the proposals as part of the government's plan to get the economy back on track through a myriad of ways. Mr Pickles is looking to develop the law surrounding Permitted Development Rights, which will make it easier for commercial property to be developed.
The significance here is that it will be easier for such projects to receive the green light without the need for planning permission from local authorities, which can be a protracted affair.
Mr Lancaster said that that the benefit to the commercial property market would be notable, as it would boost the supply of housing. Equally, there will be greater market liquidity through the "conversion of redundant offices to profitable use".
"Real rents (adjusted for inflation) on residential property have gone up 80 per cent in the past 25 years, while commercial property rents have only kept pace with inflation over that same time period," he told Bdaily when discussing the importance of such conversions.
"Residential property prices have also outpaced commercial property over the past 50 years, yet planning restrictions mean that there are persistently higher levels of vacancies in commercial than residential property. If conversions to residential use were to absorb surplus commercial property, then the long underperformance of commercial property could reverse."
The main challenge facing further conversion of such buildings is the fact that following the financial crash of 2008, there is still a "dearth of capital", Mr Lancaster was keen to point out. Appetite for new investment therefore, is restrained to say the least.
However, the outlook looks relatively positive. For example, his comments come on the back of news property consultants D&P Holt, which stated that the recovery of the UK manufacturing sector has been well received by the commercial property sector.
- Tuesday 29 January 2013