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Retail to resi – rising number of conversion applications are being rejected

One of the biggest property investment trends of the year, driven by the pandemic and the devastation this has caused for the high street, has been a large increase in the number of retail to residential conversions – with buildings that no longer serve their original purpose being turned into housing instead.

However, despite recent government proposals to make this kind of conversion simpler and quicker, research has suggested there could still be issues and obstacles in the way.

According to law firm Boodle Hatfield, the number of rejected planning applications to convert retail property into residential space rose by 35% in the year to June 2020.


Boodle Hatfield revealed that the percentage of applications for retail to residential conversions rejected by local authorities increased from 34% to 39% in the year to the end of June 2020 (in 2018/19 - 141 out of 419 applications were rejected compared to 191 out of 485 up to June, according to the Ministry of Housing, Communities and Local Government).

The firm says there is now a huge opportunity to convert redundant retail space into high-quality residential homes - with the retail sector, already struggling with rising rent costs and the switch to e-commerce, being dealt a further blow by the pandemic and its associated lockdowns and restrictions.

Land Securities, the UK’s largest property company, recently announced plans to convert some of its retail space, which makes up the majority of its current property portfolio, into residential homes.

Meanwhile, property developer Ballymore recently acquired the Broadwalk Shopping Centre in North London with the intention of converting a large proportion of the site into homes.

Elsewhere, John Lewis has announced its plan to move into the Build to Rent sector – building and furnishing private rental properties on existing or new sites – while one of the biggest commercial property operators in the country recently revealed it is to build 338 apartments to rent on the site of a vacated Debenhams store, likely to be Build to Rent units managed by BTR operator Packaged Living.

Intu, Britain’s largest retail landlord, collapsed into administration in June, some £5 billion in debt. And, as its administrators KPMG try to sell off the company’s remaining assets – offices and land – there has been talk that these could be converted or used for residential purposes.

There is also the possibility of major shopping centres – such as those previously owned by Intu (the Trafford Centre in Manchester, Lakeside in Essex and Metrocentre in Gateshead) – being repurposed if the pandemic continues to hit retail and visitor numbers.

In a sign of the times, it was recently revealed that two other big shopping centre operators – British Land, owner of Meadowhall in Sheffield, and Landsec, owner of Bluewater in Kent – have been forced to slash the value of their property portfolios by almost £1 billion due to the pandemic.

Similarly, this week saw the major central London landlord Shaftesbury write down the value of its portfolio after a sharp fall in rental income, which saw it slump to a £700 million loss as a consequence.

This trend is only likely to continue as the pandemic continues to bite and the tiered system remains in place. While non-essential shops including retail are able to remain open, even in tier 3, numbers on the high street are still drastically down, and the pre-pandemic trends of high rents, falling footfall and the rise of online shopping have been supercharged by Covid.

There is every chance many shopping centres could go the same way as the iconic Whiteleys store in Queensway, which is in the process of being converted into a mixed-use scheme of luxury homes, a boutique hotel and leisure and retail facilities.

In all these cases, though, Boodle Hatfield warns that it’s important to ensure retail to resi conversions are of a high quality, as this will inevitably improve their chances of receiving planning approval.

Simon Williams, partner and head of property at Boodle Hatfield, says that local authorities are more likely to look favourably on high-quality proposed conversions, especially if the schemes are sustainable and properly integrated into the local community.

“Developers and local authorities need to work closely together to ensure vacant retail space is put to good alternative uses, like residential,” he said. “The high number of refusals suggests that developers and local councils have not been on the same page as to what these new homes need to deliver and what the standards are that need to be met.”

He added: “With the UK’s housing shortage reaching ever higher levels, it is now estimated there are more than one million new homes needed to meet demand. Unused commercial space could be invaluable in helping to increase supply in the housing market. This could be one of the few benefits to come out of the coronavirus crisis.”


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