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LSH Midlands cities hot spots for converting offices to homes

wantspacegotspace.co.uk - LSH Midlands cities hot spots for converting offices to homesA report highlighting how 11,500 new homes could be created by converting 7.4million sq ft of the UK’s obsolete office stock has been launched in the Midlands by national commercial property consultancy Lambert Smith Hampton (LSH).
Birmingham has the most office-to-residential conversion potential, followed by Edinburgh and, in third place, Nottingham, according to LSH.
More than 80 property professionals from across the region attended an event at the company’s Birmingham offices where the latest research - Office Market Review 2013: Addressing Obsolescence – was unveiled.
Regional director of office agency Ian Leather told the audience that if obsolete offices were converted, the potential 11,500 new homes would fulfill 25% of the total recently pledged by the Deputy Prime Minister, Nick Clegg.
LSH’s research analysed 32 regional markets and found that 27% of total regional availability is obsolete (11.7m sq ft) and of this stock 7.4m sq ft is suitable for conversion.
The top five centres from the 32 analysed, where there are buildings in the right locations, with suitable layouts and residential demand, are Birmingham, Edinburgh, Nottingham, Slough and Manchester.
Explaining why we have so much obsolete office stock, Ian said: “Modern workplace trends have changed office occupier’s requirements – they need flexible, open plan space and crucially less of it. In the last 20 years, the amount of allocated space per person in an average UK office has halved.
“Office occupier requirements will continue in this vein, meaning any stock that does not meet modern workplace trends is unlikely to ever be let again and while not every obsolete building can be converted a fair proportion could be.”
He added: “In the past, getting planning permission to convert an office into residential accommodation could be costly and time consuming. This is no longer the case in England following the government’s recent announcement that they will allow office space to be converted without planning permission.”
The incentive to convert is greatest in London, where the gap between office and residential values is highest. However, the gains to be made from conversion are substantial across the UK. Average capital values for UK residential space are approximately £155 per sq ft, compared to average secondary and tertiary office values which range from £30 to £80 per sq ft.
Ian said: “Put simply, obsolete office space is a drag on our market and offering investors and developers little or no value. However, the return from converting to residential accommodation is far greater and with the headache of planning permission now removed from England the conversion route is an obvious step for any investor or developer and would go some way towards providing additional homes for our already over-crowded nation.”
During 2012, the biggest overall drop in office availability was in Birmingham. The amount of space on the market fell by over 700,000 sq ft, which pushed the vacancy rate down to 11.6% – its lowest level since 2005.
Indeed, there has been a 1.7m sq ft fall in availability since 2009, when the market topped out at 5.7m sq ft. However, at over 4m sq ft, total availability in Birmingham is still the highest in real terms of all the Big Six markets.
Through the recent establishment of an Enterprise Zone, Birmingham could see more speculative development come on-stream in the next 12-24 months. For example, the promise of local authority infrastructure funding could prompt developers to commit to starts, when development might otherwise have not been possible, added Ian.

Posted by The Editor (wantspacegotspace) on 16th June 2013 (updated 24/06/2013)

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