My second recommendation is to avoid having to apply for full planning permission. You'll be relieved to know this doesn't mean building a block of flats and hoping that the council won’t notice. Instead, it means using permitted development rights (PDRs) to change the use of an existing building without the need to apply for full planning permission.
In case you've not met them before, PDRs are rights granted by the government that allow us, among other things, to convert commercial buildings to residential use without the need for full planning permission. And from a developer's perspective, they are very good news indeed, plus there have been some very attractive changes to PDRs in England recently.
From 1st August 2021, it's now possible to convert a much wider range of properties into residential ones without the need to apply for full planning permission. To give you some idea, you can now convert shops, cafes, restaurants, banks, financial and professional services buildings, gyms, light industrial buildings, offices, doctors' surgeries, medical or health services buildings, creches, day nurseries, and indoor sports centres. That gives us a vast number of small-scale projects to aim for since many of these buildings will be way too small for larger developers to bother with.
So, to recap, we want a relatively small project, and we want to use the latest permitted development rights to reduce the planning risk. So far, so good, but let's narrow things down even further.
Basic rules for winning good property deals
There are two basic rules to remember when it comes to understanding how to win good property deals. Rule number one is to avoid as much competition as possible by looking where other developers aren't. Rule number two is to know how to make more profit from a property than the other people looking at it.
When I look at the list of buildings that can now be converted under permitted development, there are some obvious candidates for 'most attractive opportunity' in the beauty parade. Office conversions will rank highly, even though the right to convert has existed for some time. Retail conversions will also attract attention, given the proliferation of empty units and the perennial desirability of urban living. Again, it's relatively easy to see how retail uppers could be converted into apartments, as many already have been all over the country.
But if offices and shops will be where most people look, they'll fall foul of rule number one. The irony, then, is that the beauty parade will be won by the least attractive opportunity, the one that everybody overlooks. The sweet spot for my money is light industrial. Now that I've put it out there, allow me to explain why.
Light industrial buildings
Light industrial buildings are buildings that house industrial processes, and which are located in a residential area. This proximity to other homes is an obvious benefit since we don't want to convert properties that are in the middle of nowhere or on an industrial estate. Nearly every town in the country has hundreds of these buildings.
Most have grown organically, sometimes without planning permission, over the last century or so. Walk down any number of streets near the town centre, and you'll see plenty of them, often hiding in plain sight. Many are little more than four walls and a roof, the idea being to create a large open-plan space that can house whatever business is being run there. Printing works, MOT centres, workshops, car repairers, widget manufacturers – there's a long list of businesses that will occupy light industrial units. And it's fair to say that the vast majority of these buildings are not what you'd call 'lookers'. In fact, they're quite the opposite.
As a result, when most people look at a light industrial building, they don't immediately think, 'what a great opportunity to convert it into apartments.' Instead, they think, 'who could possibly want to live in that ugly old building? Surely you'd need to knock it down and start again.' This immediately removes most of the competition since the cost of demolishing and then rebuilding from scratch will be far more than simply converting what's already there. This is excellent news, as it satisfies rule number one; ditch the competition.
But the 'ugly is beautiful' thing doesn't end there, as there is a raft of other benefits to converting light industrial buildings. Let me share a few of them with you. Firstly, most light industrial buildings will be built on a thick concrete slab. This slab will typically extend across the entire floor plate and should be more than sufficient to support a residential building. This means that wherever you want to build a wall, you already have a nice firm base in place on which to build it. In many cases, the base may even be deep enough to support a multi-storey residential building, which always going to be more profitable than a single storey.
Most light industrial buildings are open plan, unlike office buildings which tend to have supporting pillars and stairwells dotted around. This makes for far fewer constraints in terms of the layout of your flats. It's relatively straightforward to upgrade the walls, floor, and roof to residential specification, plus your contractor will love you since they can do most of the work inside, undercover (rain isn't much fun to work in and can even stop play).
Light industrial buildings also tend to have significant headroom. This could not only allow you to add a second storey or to create vaulted ceilings, but you also have room to raise the floor to accommodate insulation and pipework underneath. And since you're not disturbing the existing concrete base, any potential contamination issues lying underneath it will remain equally undisturbed.
What about new build?
Conversions are all very well, but what about new-build, I hear you ask? All this recycling of existing buildings sounds very worthy, but surely it's easier to build something new from scratch? Well, once you have planning permission granted and the foundations are in, then I'd probably agree with you. But two of the key challenges of new-build is the unknown quantity of going into the ground and the risk of NOT getting planning permission. In addition, digging the footings for a new build is relatively straightforward when the weather is fine but not so great when it's not. I'll let you opine on how many guaranteed dry weeks there are in the English calendar, but it's a moot point with a conversion project since the footings are already in place.
See beyond the ugly façade of light industrial buildings
The final benefit of converting light industrial buildings lies in people's inability to see past their ugly façade. I'm reminded of this each time I see the eye-watering cost of flats converted from the old wharf buildings on the Thames or New York loft apartments.
Rather than masking their heritage, the developers have made a feature of it. I won't pretend that the old printing works on Commercial Street has the same kerb-appeal as a wharf conversion overlooking Tower Bridge. But the same principle applies, and a good architect will not only be able to sort the external appearance; they'll also be able to incorporate heritage design cues and features that add both interest and value. And when the competition is a bevy of uninspiring, lookalike flats, your characterful, individual units will certainly have an edge.
When you identify a light industrial building for conversion, look at it afresh. See beyond the ugly exterior and appreciate the potential. Armed with the ability to convert to residential using permitted development rights and without much competition it could be the perfect project for you.
*Ritchie Clapson CEng MIStructE is the Director of propertyCEO