Across the UK there is a need to develop existing properties to reflect the changing needs of our towns and cities. Relaxation of the Class MA Permitted Development Rights (PDR) from March 5th highlights that the government recognises there is huge need for new homes and supports developers and investors in facilitating this shift.
This streamlined ‘Prior Approval’ planning route will enable developers and investors to convert commercial buildings into residential or mixed use. This is fantastic news for building owners and developers, however, with only an initial 3-year window, it’s important to act on this quickly to seize the opportunity.
Commercial property under pressure and residential units in high demand:
The National Housing Federation estimates that England needs 340,000 new home per year, until 2031 to meet current demand. This demand for homes, as well as the rise in mortgage rates, has also compounded the national shortage of rental properties. The government has committed to meeting the goal to support developing new housing and recently committed an additional £3bn of funding to support their ambitious plan. But there is recognition across the industry that the new build sector alone will struggle to meet these targets – retrofitting and refurbishing existing property is vital to create quality homes across the country.
Covid changed the way we work, moving us away from the daily commute, and now more than half of office workers are on a hybrid model, drastically reducing the square footage companies need to rent and increasing interest in co-working spaces. Alongside this, ongoing shifts in retail means decreased demand for commercial units and empty shop fronts on every high street. These shifting patterns and reduced demand in towns and cities across the country mean some building owners may either want to shift their property away from commercial use to residential; or they are experiencing increased demand for live/work options in their area and may be looking to convert to a mixed use.
Running alongside these shifts, commercial landlords are facing looming deadlines to improve energy efficiency in line with new Minimum Energy Efficiency Standards (MEES). Converting some property may not be commercially viable, and owners may be looking to sell. Others may see it as an opportunity to refurbish their property and convert it to residential which is in higher demand, to maximise the return on investing in retrofitting by optimising the rentable space.
With demand for homes – for sale or rent – at a record high, the new changes to PDR will allow property owners to adapt commercial properties to reflect the changing needs of their communities and enable developers and investors to fast-track projects.
What are the changes to PDR?
Over the last decade there have been several changes to PDR, with more under consultation. Together, government and developers are committed that these latest changes strike the important balance between supporting housing delivery, allowing for redevelopment of commercial property whilst keeping appropriate standards in place so projects are high quality and sustainable.
The unprecedented changes to PDR from March 5th cover two key areas:
- The removal of the 1,500 square meter floorspace cap on conversions means there is no longer any size restriction imposed
- The requirement for a property to have been vacant for three months before submitting an application has also been eliminated.
This relaxation of the floorspace cap and vacancy requirements has expanded opportunities across a wider range of properties, enabling projects previously unfeasible to be commercially viable. This is good news for developer, investors, and communities – meaning fewer empty or underused building and more good quality homes can now be delivered.
This change offers developers and investors more confidence. Unlike the traditional time-consuming and sometimes risky process of obtaining planning consent, the prior approval process typically yields results within eight weeks, rather than an average of 2 years. The streamlined process also involves fewer requirements, typically five or six instead of up to two dozen. As well as being faster and more cost-effective, PDR also provides greater certainty of outcome, meaning you can have more confidence in securing consent.
An opportunity to fast-track projects to meet record demand
The newly relaxed PDR presents a significant chance for property owners to revitalise commercial buildings and tap into broader redevelopment possibilities. The potential scale of the opportunity is significant: research shows that in London alone 140 million square feet of space needs updating to meet the new commercial EPC requirements. By unlocking the possibility of transforming some of these underutilised buildings into much-needed residential, as well as reducing other barriers such as the absence of affordable housing obligations under the policy, the PDR changes may be the start of an exciting shift in the London property market.
However, there is some urgency required to maximise on the potential this offers. The update put a 3-year initial limit of the relaxation of the planning requirements, there is also a risk that a change in government could lead to revisions in policy, potentially prompting local authorities to resist or block conversions. Developers are urged to seize the current advantageous conditions, as the future landscape of permitted development rights remains unpredictable.
London Belgravia Group can help developers and investors take the next step with confidence
With huge demand, and the change currently time limited, it is vital to move forward with developments quickly. London Belgravia Group can act as principle lenders, insurance brokers and impartial advisors to connect you with professionals to support the progress of your project.
We provide short to medium term finance solutions for experienced residential investors and developers in the UK. Speed of decision making, and certainty of execution make us an ideal lending partner for refurbishment projects. We pride ourselves in offering a tailored, flexible & agile approach to real estate lending, our clients benefit from direct access to the decision-making team.
As experts in insurance, we can help you secure the most suitable cover for your project, whilst ensuring a smooth process all the way to practical completion and certificate issuance. We see our role as an independent advisor who reviews the merits of each scheme to help you make well-informed comparisons. Our independence means we are never tied to warranty providers; this ensures that our experts can give you access to the product that best fits your need without market bias. All providers that we work with are recognised by the CML (Council of Mortgage Lenders), backed by A-rated underwriters and we regularly review which warranties meet our standards and the standards of the developers for which we work.
From architects to engineers, we have worked with professionals across the sector who have been involved in the construction of large-scale residential and commercial developments, prime & super-prime residential, new build, conversion, and refurbishment projects. This breadth of experience means we can connect you with the experts you need to keep your project on track.
Let’s work together to give commercial buildings a new lease of life, and unlock wider redevelopment potential – get in touch to learn more about how London Belgravia Group can support you.
