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A different class

The government hopes changing planning rules to allow empty offices to be transformed into homes will ease the housing shortage. Jules Birch visits the west midlands to find out if it will work

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It seems simple. There are thousands of empty offices and redundant factories out there. Why not turn them into desperately needed homes?

That’s what the government hopes will happen under its plan, outlined in last month’s Budget, to simplify the planning system to allow change of use without planning permission. Last Friday, communities secretary Eric Pickles published a consultation paper in which he gave more details about the government’s plan to make it easier for developers to convert empty commercial buildings into housing without seeking planning permission from the local authority.

The west midlands seems like a good place to start. Birmingham alone has a glut of 3.9 million square feet of empty office space - and one great example of how empty offices can be turned into homes: the iconic Rotunda office building on the Bullring. Look around the city and you’ll find plenty of other examples of redundant buildings being turned into homes and mixed use developments: from the Mailbox - the old city centre postal sorting office - to the Crocodile Works, a 19th century machete factory.

Mixed views

So far so promising. But talk to people in the region’s property industry and you get some mixed views about the housing potential of the Budget proposal.

Supporters include Steven Byrne, chief executive of Birmingham-based MCD Developments and spokesperson for the West Midlands Developers’ Alliance. ‘There is a problem with underutilised buildings, especially with buildings that are coming to the end of their life, mainly on the periphery of city centres,’ he says, adding that converted offices could be a way to provide housing where people need it to be.

‘There’s also a problem with underprovision of affordable housing where key workers need homes that are not 20 miles away from their job,’ he says. ‘This proposal goes some way to linking those problems together with space in the right location that can help people get on the property ladder.’

Chris Rosier, a spokesperson for for the Royal Institution of Chartered Surveyors on housing and inner city residential property, reckons the proposal could make a big difference. ‘Flexibility and adaptability is what developers want.’

But others are more sceptical, and there’s a feeling that schemes that might work in central London will not be viable in the west midlands.

‘My first reaction is that it is going to have a very limited impact in certain locations,’ says Iain McArthur, associate director in the Birmingham office of surveyor DTZ. There is more demand for homes in London, and less of a glut of apartments already built, he adds. ‘There might be significant pressure to convert offices to residential use [in the capital] but I don’t think the same pressure applies in the regions. The key issue is lack of lending - the banks are still not prepared to provide enough or any lending for development full stop - especially when it comes to apartments.’

Jill Astley, a Birmingham-based director at property consultancy Drivers Jonas Deloitte, is also doubtful. ‘Any simplification of the planning process should be good if it’s cutting out bureaucracy, but this isn’t going to be a panacea for lots of new housing’, she predicts.

Limitations

Office blocks can only be converted into apartments, she says, and she questions whether the demand is there in Birmingham. ‘There’s been less interest in [existing] high-density schemes. People like to feel they’re getting value for money. It can still work if you’re an investor, but for some people if you’re looking to buy to live [in an apartment] and it costs as much as a house two miles from the city centre, then it’s a different matter. The midlands still has a very traditional house buying population.’ It appears that the problem in Birmingham is not so much that there are lots of empty flats - it is that developers are finding the development of more of these kind of properties unviable. Although there is demand from tenants, there is not the same sort of demand from buyers.

The same arguments apply throughout the region. ‘There is quite a large amount of vacant office space in Wolverhampton city centre - offices that are 20 years old with extremely low rents that are, therefore, of extremely low quality,’ says Graham Clark, development manager at Wolverhampton Council. ‘So on the face of it you might think that change of use, with no need for a planning application, would be an easy thing to do; but that assumes that the offices could be converted into apartments. When you have any discussion with house builders they say the apartment market is completely dead.’

Meanwhile, Nathan Cornish, managing director midlands and south West at Urban Splash, the developer of the Rotunda, argues that if the government is trying to encourage more house building it should reform the system that levies VAT on conversion work but not on new build.

Changing cityscapes

So where in the west midlands might the government’s plan to make changing the use of buildings easier work? DTZ’s Mr McArthur points to low density office space in areas like Edgbaston and Solihull where there is high residential demand, and also cites Leamington Spa, the Warwickshire town where period buildings that have been converted into offices could easily be changed back into homes.

The government’s consultation, which runs until 30 June, does not include the conversion of retail units to housing. However, there would be potential for the delivery of new homes in the midlands if the relaxation of planning regulations were extended to those currently categorised by planners as class A - retail use.

‘There’s plenty of scope [for the conversion of retail units on high streets],’ considers Lindsey Richards, head of midlands south at the Homes and Communities Agency. ‘They are the right size and shape to provide family accommodation and that, in turn, could support some retail coming back into use. We may end up with more mixed-use areas that are generally very successful.’

Indeed, high street premises across the UK are being vacated as a result of the recession and the trend towards internet shopping. According to the industry body the Interactive Media in Retail Group, online shopping in the UK grew from being an £1.8 billion per year industry in 2001 to a
£56 billion industry in 2010 - and it’s thought to have grown by another 20 per cent in the last year.

Meanwhile, figures published by the British Property Federation show that a quarter of shops in Birmingham are vacant. In Walsall, 27 per cent of units stand empty and 24 per cent in Wolverhampton are unoccupied.

Changing use from commercial to residential, as detailed in the coalition’s consultation document, is about more than just the buildings themselves. It is important to select the correct commercial property for conversion as it is an expensive process, warns the WMDA’s Mr Byrne. ‘In many cases high end unit values are needed to support the high costs of conversion and sympathetic use of the existing buildings,’ he says. ‘These costs can sometimes be higher than for purpose built residential properties.’

Ian Tant, senior partner at planning and design consultant Barton Willmore, warns that, ‘the government may need to tread carefully about allowing change of use without any funding for schools, open space and all the other things families look for’.

It seems planning issues will not go away even if change of use is simplified. Apart from anything else, most conversion schemes will still require planning permission for essential changes to the exterior of the building and new businesses will still need buildings to generate jobs after the recession. Much will depend on the detail of the government’s plan and how it’s implemented.

‘The problem lies when these buildings are in employment zones and are zoned in the local plan basically as commercial-only buildings,’ explains Urban Splash’s Mr Cornish. ‘It will be interesting to see whether the government actually sees through its rhetoric. It’s one thing for the government to make a very general statement about the principle - they’ve also said in the Budget that there will be a presumption in favour of development - but how local authorities interpret that will be very interesting.’

Simplifying change of use: the class system

Empty offices could be converted into more than 260,000 homes over the next 10 years, according to a government consultation paper published last week.

The key proposal is that change of use from the commercial B1 use class (business - offices, research and development premises and light industry) to C3 (dwelling house) would no longer need planning permission and become permitted development.

But the government also believes there is a strong case for doing the same thing for B2 (general industrial) and B8 (storage and distribution) and an opportunity to change the rules on unused space above shops for conversion to more than just a single flat.

And there will be a wider review of the use class system in a bid to reduce the planning burden further and encourage local communities to use the powers they already have to make best use of existing properties.

The government says there is an oversupply of commercial land. Just 2.8 per cent of the 129,000 homes completed in England last year came from conversions but the commercial vacancy rate is currently running at 7 to 9 per cent.

The consultation paper argues that B1 buildings and land are most suitable for conversion to residential but B2 and B8 sites like vacant edge of town business parks could also be good prospects.

An impact assessment of the policy says that converting 50 per cent of long-term empty B1, B2 and B8 floorspace could create 262,880 homes. Almost 30,000 of them could be in the west midlands and 37,000 in the east midlands.

An all-round success

The Rotunda building in Birmingham is one of the west midlands’ most successful examples of an office block converted into homes.

Built in 1965, the circular 22-storey tower is one of the city’s most iconic and best-loved buildings. But it was badly in need of refurbishment when developer Urban Splash appeared on the scene in 2004 with a £30 million plan to turn it into 232 flats.

‘There basically wasn’t an alternative to our proposals,’ says Nathan Cornish, Urban Splash’s managing director for midlands and south west. ‘The building didn’t lend itself very well to commercial use anyhow because of the quite restricted floor to ceiling heights so it was only really relevant in the modern world for residential conversion.’

The main planning problem was not so much the change of use, rather that the Rotunda is Grade II listed. Because of this there were objections to Urban Splash’s proposal to install full floor to ceiling glazing. But Birmingham Council planners were convinced after the original architect, Jim Roberts, explained that this had been in his plans in the 1960s, but had to be abandoned due to cost.

The timing of the project was also crucial. ‘We finished it in March 2008 so we timed it just about OK,’ says Mr Cornish. ‘If it had been a year on it would have been difficult for obvious reasons [the credit crunch and the recession that followed]. Would it be viable to do today?

I don’t know, I’d have to look at the figures.’

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