South East office-to-resi conversions could top 20,000
Almost 13m sq ft of office space in the South East of England could be turned into homes under permitted development rights.
The buildings tracked by Lambert Smith Hampton have the capacity to provide 20,000 two-bedroom homes. It analysed offices built before 2012 with high levels of vacancy or imminent breaks or expiries.
Markets with the largest opportunities are Reading, with 1.9m sq ft of office space that can be converted to residential under PDR, Blackwater Valley (1m sq ft) and the South Coast (1m sq ft).
Almost 13m sq ft of office space in the South East of England could be turned into homes under permitted development rights.
The buildings tracked by Lambert Smith Hampton have the capacity to provide 20,000 two-bedroom homes. It analysed offices built before 2012 with high levels of vacancy or imminent breaks or expiries.
Markets with the largest opportunities are Reading, with 1.9m sq ft of office space that can be converted to residential under PDR, Blackwater Valley (1m sq ft) and the South Coast (1m sq ft).
Marlow, Uxbridge and Reading hold the largest amount of existing stock.
PDR targets represent close to 20% of the total stock of these markets, compared with a region-wide average of 7.5%.
The office-to-resi trend is supported by office occupiers favouring new buildings with more amenities and better ESG credentials, leaving older office stock effectively redundant and meaning investors can gain more value through redevelopment.
LSH said the recent removal of size and vacancy restrictions has opened up the option of office-to-residential PDR conversion for a wider range of buildings. But political uncertainty hangs over the future of PDR given the impending general election, with the agency adding that the window of opportunity may not be open for long.
Charlie Lake, senior director at LSH, said: “Movements in capital values have heightened the case for office-to-residential conversions. According to our calculations, residential values per sq ft are now on average 53% higher than office values across the wider South East and East of England.
“This gap has widened significantly following the sharp repricing of office values seen since late 2022, and particularly large margins to secondary office values have emerged in many locations. While the first wave of office-to-residential conversions was triggered by legislative change, an imminent second wave could be equally driven by shifts in values.”
