Office conversion is an obvious step for investors and developers – Lambert Smith Hampton
Analysis of 32 regional UK property markets by Lambert Smith Hampton has found that 27% of total regional available office property (11.7m sq ft) is obsolete and that of this total, 7.4m sq ft is suitable for conversion.
“This obsolete space is acting as a drag on the market, by artificially inflating the availability figures and discouraging new development in locations which have high levels of secondary and tertiary availability, but low levels of the type of office space that occupiers are increasingly targeting,” LSH says.
Following the government’s recent announcement that they will allow office space to be converted without planning permission, “the conversion route is an obvious step for any investor or developer,” says Tony Fisher, national head of office agency at Lambert Smith Hampton.
If 7.4m sq ft of office space were converted it could provide 11,500 new homes, LSH says; it has ranked the top centres, considering the amount of buildings in the right locations, with suitable layouts and residential demand. These are Birmingham, where 2.4m sq ft of the city’s stock of office space has the potential to be converted; Edinburgh, where 800,000 sq ft of space actually on the market could be converted; Nottingham (400,000 sq ft); and Slough (340,000 sq ft).
Tony Fisher explains that the reason for the high amount of obsolete office stock is that, given the changes in modern workplace requirements, “any stock that does not meet modern workplace trends is unlikely to ever be let again”. Modern occupiers need flexible, open-plan space and – crucially – less of it, he notes. These changes have coincided with a downturn in the market since the 2007-2008 peak. “A medium-sized office market like Nottingham has almost a million sq ft of available grade C space, for which there is very little market. Much of it will never be let again,” the firm says.
Although planning authorities in Central London have not been receptive to the conversion process because of their desire to protect small businesses and maintain the infrastructure of London’s office-based economy, LSH says, there has already been a quickening of the pace of office conversions in regional markets since the top of the market in 2007-2008.
