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  • Writer's pictureNormette Homes

5 Benefits of Commerical-to-Residential Development

Updated: Dec 17, 2021

There is no denying that we are living in a new reality and the property sector is not exempt from this. In fact, since the onset of the pandemic, the UK government has made some significant changes when it comes to to development planning and building regulations.

Experts in the property sector called it the biggest shake-up to the planning system they have ever seen.

One of these significant changes has made it a lot easier to convert and develop commercial properties (including retail outlets) into residential properties. Retailers such as John Lewis have started taking advantage of the new rights.

I thought it was a pretty genius vote, actually because overnight they said, you can convert office buildings into residential, without the need to get planning consent.” - Xavier Pullen, Director of Commercial Property

The truth is, despite the increased activity in the housing market, the residential needs of the UK population are really not being met. This is why believe there are incredible benefits that come with doing a commercial-to-residential conversion including:

1. A faster & cheaper process: As highlighted, due to the new permitted development rules and Use Class E, you can expect the decision process to take 56 days (can extend for longer) and pay a £96 fixed fee. In comparison to a normal planning application, this is significantly quicker and cheaper for developers.

2. Lower Taxes: It will typically avoid higher stamp duty land tax (SDLT) rates on the purchase of the second property, as non-residential and mixed-use properties are exempt. You’ll pay the standard rate of SDLT for buying a commercial property.

3. New High-Street Opportunity: For the moment, Covid has changed the necessity of in-person shopping, unfortunately, this means the high streets are taking a hit! However, the new Use Class E means retailers and potential investors have a broader scope for the change of use for retail spaces. There are ample examples of large corporations looking to take advantage e.g. Lloyds Banking Group, John Lewis and Hammersons.

4. Attractive Profit Margins: Typically, purchasing a commercial property will be cheaper per sq ft than a residential. If done right, this potentially means your profit margins should be more attractive when converting a commercial property to a residential, rather than purchasing a derelict residential and renovating it.

5. Great Location: Commercial properties are usually set up in prime locations, like close to transport or in city centres. This means the properties you develop are much more desirable to future buyers or renters.

The benefits of converting a commercial property into a residential property are clear. Whether you’re planning on building a rental unit or building your dream home in a prime location, reach out to our team for some expert advice on how to get started!


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Normette Homes specialises in commercial investments

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