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Are office losses lettings' gain?

by ARPM

What do NatWest, BT, HSBC, Virgin Money, KPMG and Vodafone have in common? They’re all blue chip companies with no plans to bring staff back to central offices this year – despite pleas from our Prime Minister. In fact, the list of businesses who are radically rethinking how to use their offices is growing by the day. 

 

A study by the BBC found 50 of the country’s biggest employers had no set plans to bring back all staff to the office full time – paving the way for a wide adoption of flexi-working and a re-evaluation of office space. Metro Bank has already closed one of its London offices, while Lloyds Bank is set to test different styles of flexible working to decide how often staff will visit the office, with a goal of reducing the office space it uses.

 

We’re going to hear a lot more about flexible and remote working, collaborative hubs, shifts systems, working patterns and hybrid workplace strategies – the net result will be a disposal of commercial assets in business districts or at the very least, shifts to smaller, shared spaces.

With increasingly vacant or under occupied offices on the cards, could premises losses be lettings’ gain? It has always been possible to apply for change of usage so offices (B1) could be repurposed into residential dwellings (C3) but we may be on the cusp of volume conversions. 

A report published in Architects’ Journal in January 2020 found more than 54,000 homes have been created from old office blocks through permitted development rights since 2015, amounting to 6% of all new homes created nationally. This percentage looks set to rise in line with increasing office vacation rates. Working from home? More like a home from working.

Reflecting this seismic change, Urbanist Architecture updated its guide to converting offices into homes in August 2020, off the back of Housing Secretary Robert Jenrick’s overhaul of planning rules. New and bolstered permitted development rights now offer developers the opportunity to demolish offices and replace them with flats or houses, in addition to converting old business haunts into homes without the need for planning permission.

Offices are prime targets for developers. Not only are they usually more cost effective to buy and easier to turn into apartments than building from scratch, the land they occupy is normally in sought-after locations that lend an instant air of desirability. Conversion apartments of this nature do lend themselves to the private rental market so it may not be wide of the mark to suggest a glut of rental accommodation in city centres 6 to 12 months on from now.

Letting agents should keep a key eye on local planning portals and commercial sites coming up for sale so they can monitor potential sources of rental properties. Those who make the right connections could benefit from ready-made PRS opportunities – especially those that have the capacity to bulk or block manage.

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