Can the latest permitted development rights deliver quality housing as well as remove obsolete office stock?

Permitted development rights (PDR) have served a valuable purpose in allowing the re-purposing of poor quality, secondary or tertiary office buildings, bringing what may have become long-term vacant real estate back into functional use. Some town centres such as Croydon have seen great swathes of older office buildings re-purposed in this way.

However, many within the industry have a clear – and not very positive – view of PDR. All too often, the product created through PDR has fallen well short of acceptable standards – hence the horror stories.

One of the big issues is that much of the PDR driven development that has been delivered pre-dates the more contemporary recognition of the value of wellness and amenity in real estate development. To say rules were lax in respect of end-user consideration is an understatement; little more than a flood risk assessment was required before ‘prior approval’ could be secured.

A quick fix

As a result, much of the permitted development of the last decade failed to consider daylight and space standards (until 2021), parking or amenity access for future residents. Single aspect residential units were common, many tiny spaces were badged as homes and some residents ended up in the middle of industrial estates, with only forklift trucks and articulated lorries for company. Affordable housing was not delivered either, so to local authorities, it offered little more than quick fixes for redundant premises.

The bad reputation even led to it becoming a bargaining chip for canny developers who used the threat of a PDR scheme to negotiate a better-quality scheme via the planning application process. This arguably delivered better quality product and since 2021, the latest PD rules have at least required adherence with nationally described space standards, but the negative perception remained.

Roll on to our post-Covid world and growth of hybrid working and PD has come to the fore again in the form of new legislation that came into force earlier this month. The government has removed the upper size limit of 1,500 sq m for permitted development schemes and has eliminated the requirement to market first to prove a lack of demand or for a prior period of vacancy. Why have they done this? To accelerate the delivery of new housing and maybe also to allow more office buildings to be re-purposed. 

Amenities and comforts

The flight to quality in the office market and the increasing desire among tenants to move into buildings with the kind of amenities and comforts that entice people back to the office are well documented. Paired with the ESG requirements on most tenants’ wish lists, the cost of meeting EPC targets and tighter search areas given the desire for excellent public transport access, and many older office buildings, especially in less central locations, are “stranded” in every sense.

In flies the option of a change of use to residential. Will it save the day? In some cases, yes. A traditional planning application route is always available, but this can be expensive and time consuming whereas PDR enables early conversion of some vacant or functionally obsolete buildings, creating windfall residential units for councils looking to boost housing supply. But where there are Article 4 Directions that remove PD rights, councils may not be willing to permit change of use.

Unlocking quality

The issue here is that structural change in the office market has happened very quickly in recent years and planning policy (both the NPPF and at a local level) has not kept up with the pace of change. While it is right that councils may want to protect core commercial areas, for example in town centres, we also need councils to be forward looking and willing to allow change of use, even if adopted policy may not permit this. A willingness to depart from stated policy will be key to unlocking quality schemes.

What does this all mean? We see clear opportunity for office-to-resi schemes delivered via modern PDR but also via traditional, negotiated planning applications, especially in suburban locations that suit housing but increasingly don’t fit the modern workspace mould. Supporting clients to find a profitable solution to problem assets and considering alternative uses is just the newest challenge for an asset management specialist and one that we see long-term sector gain from. It will remove lower-quality offices from the market, leaving better office buildings that tenants want, helping to re-frame UK office stock in the eyes of the investment world.

Developers and councils working collaboratively in recognition of the structural changes in office occupation could foster a new wave of sorely needed homes. Change – when made with the benefit of past learnings – is healthy.