Retail to residential conversions set to rise
The number of retail properties approved for conversion to residential housing increased just 2.8% to 404 last year, up from 393 the previous year* says Boodle Hatfield, the leading private wealth law firm.
The law firm says that changes to the UK’s planning system proposed by the Government will be an important step in increasing the speed at which empty retail property can be converted in much needed housing.
With the UK’s retail vacancy rate already at 12.2% in March 2020**, the problem of vacant retail space is set worsen due to the impact of the coronavirus lockdown.
‘Non-essential’ bricks and mortar retailers endured three months of zero sales from their stores during lockdown. It is feared that many will be forced into insolvency when the current moratorium on winding-up petitions is lifted.
Coronavirus has hastened the shift towards online retail, which is likely to lead to further closures of high street and independent retailers, increasing the amount of long-term vacant retail space.
Prime Minister, Boris Johnson, recently flagged up a series of planning reforms designed to boost the economy and provide more housing stock. There will be greater flexibility when converting a wide range of commercial properties into residential housing. Under these new rules, planning applications will not be necessary.
Developers will also be able to demolish and rebuild vacant residential and commercial buildings without planning permission, provided they are rebuilt as homes. There will also be greater flexibility in use classes. For example, premises that had been used for retail, could be converted into a café or shop without requiring planning applications or approval via the local authority.
Residential developer, Ballymore, recently announced it plans to buy a 190,000 square ft, north London shopping centre for £75m and convert this to residential housing. Boodle Hatfield says that more lending to the construction sector is needed to finance a greater number of large-scale residential developments, such as that planned by Ballymore.
Reports show that up to 340,000 new homes are needed per year to cater to demand. Current Government targets to provide 300,000 new homes per year by the mid-2020s falls significantly short
Simon Williams, Partner and Head of Property at Boodle Hatfield, says: “Changes to planning legislation will be extremely beneficial in helping to speed up the development process.”
“Unfortunately, the retail sector will be one of the bigger casualties of the coronavirus crisis, which will sadly lead to many businesses being forced to shut and even more vacant units. It’s good news that this space will be able to be put to use in helping to relieve the UK’s chronic housing shortage”
“However, lack of funding to the sector remains a barrier to the number of housing developments that can go ahead. More financing will be needed, to avoid vast swathes of deserted spaces.”
*Ministry of Housing, Communities & Local Government – year end December 31 2019
**British Retail Consortium and Local Data Company