Resi wrap: Is this the end for PD office-to-resi?

Welcome to your weekly round-up of residential stories from EG.

From this month, controversial office-to-resi conversions could largely be a thing of the past.

The mechanism, introduced in May 2013, allows developers to bypass local authorities planning processes to allow vacant offices to be turned into homes. However, it has been widely criticised as providing poor quality homes, with the mechanism branded by former housing minister Nick Raynsford as creating “slums of the future”.

Yet the government has continued to expand its use. Last year, housing secretary Robert Jenrick confirmed PDR would be expanded to all vacant commercial premises. The decision was made despite the government’s own commissioned report concluding that these conversions appear to create “worse quality residential environments” with concerns raised over the “health, wellbeing and quality of life of future occupiers”.

Following industry, planner, council and political backlash, two caveats were hastily added to the new PDR. First, a ban on minimum home sizes, and second, a maximum conversion limit of 1,500 sq m, or 16,145 sq ft, which came into force this month. The two combined effectively limit the number of homes to just 40 in a PD scheme.

The new restriction saw a rush of applications in July, with the number of homes proposed hitting new records, at 6,859 homes for the month.

One of the most notable applications came from drinks giant Diageo, seeking to turn its global headquarters in Park Royal, NW10, into a block of 200 rental flats. Diageo’s application notes the challenging office market in the area, and hopes to replicate the success of neighbours like Fairview, which have secured institutional investment for BTR, just without the build.

As the barriers for PD mount, many anticipate those caveats could ultimately prevent use of PD in the future.

A timely reminder of PD’s challenges this week came from the industry’s poster child Inspired. Launched by the late property entrepreneur Martin Skinner, Inspired was established in 2003 as a developer specialising in office-to-resi conversions. Inspired boasted yields of 12-14% based on home sales of £1,000 per sq ft. But a challenging for-sale market in the wake of the Brexit vote, high costs and lender caution ultimately led to the collapse of the business. This week Inspired Developments appointed a liquidator to finally wind up the business two years after it fell into administration.

The concept of re-use featured elsewhere in EG this week. In an op-ed, fashion designer Christopher Raeburn called on the industry to think responsibly and shared his own experience of recycling and regeneration, including a partnership with BTR provider Get Living in east London.

Raeburn said: “The reality is, we fundamentally need to change everything we are doing as people.”

Raeburn is not the only one calling for drastic change. Following a landmark report from the UN’s IPCC, secretary general António Guterres warned of a “code red for humanity”. In response, property experts have demanded immediate action to help the industry tackle climate change.

There is a need to retrofit stock and build more sustainably, with still huge demand for new homes.

Could MMC hold the answer? EG’s Resi Talks podcast explores the challenges in unlocking MMC, including high costs, perception problems and getting housebuilders on board.

Listen to the podcast, check out the digi edition, download the app (iOS and Android) and read on for more of the week’s headlines:

COMMENT: How to bridge the gap between hospital and home

Real estate has more ‘rich pickings’ for private equity

TPG and Gatehouse launch £500m BTR venture

L&G splashes £77m on Hove BTR

Telford Homes snaps up Perfume Factory BTR

Leicester City FC taps mixed-use scheme for stadium upgrade

Southwark plans mixed-use at Currys PC World site

Urbanest’s 46-storey student digs set for approval

Verto plans 1,858-bed ‘world first’ zero-carbon student village

Plans in for Watkin Jones’ Glasgow giant

First Base and Railpen pitch BTR and offices at Devonshire Gardens