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The sweetener of the new PDR

Blog 24 08 21 The sweetener of the new PDR hero

The sweet shop has opened for residential developers as new permitted development rights (PDR) have come into effect allowing more property types to be converted into housing more easily.

Previously PDR has been mainly for the unmarketable office blocks in suburban areas. It was first introduced by the Government in 2013 in response to the fall out of the Global Financial Crisis and the housing crisis caused by the lack of availability or affordability of homes. Between 2013 and 2019 in London alone almost 16,000 new homes were created from 676,000 sq m of office space.

Now, and maybe as a pre-emptive move of a similar fallout from the pandemic, from 2 August Government has granted the option for empty shops, cafes, restaurants, gyms and even light industrial units, any properties under the new use class E, which are vacant and at risk of becoming unsavoury eyesores across the country, to be converted into homes - without formal planning permission needed. Between the four million sq ft of empty stores and offices in London and the UK’s big six cities there is a potential for more than 6,600 of properties to be built.

One significant new change in the PDR rights is that properties in conservation areas can now be considered. An impact assessment has to be submitted as part of the process, but this opens up a whole host of opportunities to stimulate regeneration in areas that have previously been considered too challenging. Conservation areas typically correlate with higher sales pricing, which would be delectable news for developers and landowners that have the confidence to convert themselves.

Office to residential conversions have left a bad taste in the mouth for some, as a few developers did initially try to cram them in tight with many schemes comprising of tiny ‘micro units’. Mortgage providers have resisted lending on schemes in areas like Bracknell, Luton and Croydon – three areas in the south east which have seen a significant amount of this type of development in recent years. However the Government has now got ahead of these issues with the new rules bringing about the need for a minimum space standard within these conversions.

But now the new criticism has come from some that suggest that the expansion of PDR could start the retraction of the high street in town centres (many of which were previously protected by the conservation area exclusions) as well as the reduction of job opportunities, and general poor amenities for the local area.

The removal of employment opportunities has never been popular with local planning authorities, which is why large purpose-built residential developments normally incorporate a mixed-use element as well. However it is not unheard of for these ground floor retail units to struggle to secure the traditional retailers they were design for. Sometimes local authorities may then take on these units themselves, as library spaces, or instead they’ll be repurposed for larger floor plate entities such as 24 hour gyms. Trying to maintain status quo of a high street is not always beneficial to keeping it going.

But it depends what side of the fence you sit on, others argue that creating additional housing within town centres is another way to help stimulate the local economy, right-sizing the pick and mix of a rapidly growing number of vacant retail outlets in an area. Also if local authorities remove the necessity for car parking spaces then these residential units can possibly provide a solution for a lower carbon kind of lifestyle; you don’t need a car if you live right beside the supermarket, sofa shop and clothing stores.

The beauty of these new rights is that small pockets of land can be scooped up to create residential infill sites, or packaged together to make a comprehensive piece for a developer – although there is a maximum cap on qualifying floor size of 1,500 sq m. But yet there are challenges too, retail units are often deep in layout, with a lack of outside space, or access to natural light which will mean that not every vacant unit could be considered for conversion. Also the amount of units that can be converted are not going to suddenly cause a significant increase in demand in infrastructure needs, as opposed to a new development of 500 plus units.

There are obvious benefits to utilising this planning break if you are a landowner – unlike a full planning application the decision making time for prior approval is only 52 days. There is also no need to provide affordable housing and no Section 106 or Community Infrastructures Levy to pay. However local authorities will still have the power to dismiss applications where the unit has not been vacant for at least three months.

Let’s be clear about this; small units created by developers from PDR opportunity are not an ideal solution to the housing crisis. However they do sell and people want to buy them so there is a market for this product. Once again central government has had to step in and create a system to expedite the planning process, which is becoming worst and worst and increasingly costly. If there is an argument that we shouldn’t build these type of units, that it creates no affordable housing, then we are not looking at the cause of this and merely at the product made which is an effect of a broken planning system.

During the last year we’ve seen the Government remove repossession rights for retail landlords, meaning that when the rent moratorium does eventually come to an end there is likely to be more properties that have been vacant for the necessary period – opening the door for potential conversion specialists. It is essential that landowners instruct advisers that can envision potential value and opportunities from future uses, and have the planning knowledge to back it up, to ensure they can realise the sweet, full potential value of their assets.

This article was originally published in Estates Gazette on 10 August 2021.

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About the author:

Will Agnew is an associate director in the residential team where he has managed the acquisition and disposal of a wide range of sites that possession prior approval consent via permitted development rights in London and the south east. He is experienced in arranging transactions for these opportunities, as well as advising landowners in obtaining these permissions prior to a sale.

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