Bristol has seen the highest number of new homes created from office to residential conversions of any local authority in England, adding 530 new homes to Bristol in the year to March 2015.
Previous differences in values as well as a supply of older lower grade office stock in the city enabled developers to take advantage of the relaxation of planning policy to allow conversions from office to residential under Permitted Development Rights (PDR) introduced in 2013. As a result, many recently launched residential schemes came through PDR, providing much needed housing for Bristol.
This feature of the planning system has now been made permanent and has expanded to allow the demolition of office space and the conversion of light industrial space to residential. In theory, this change in policy should facilitate a surge in the conversion of unused or under used commercial space into much needed housing.
However, the high rate of conversions from office to residential in Bristol reflects the volume of older stock in the city rather than any weakness in commercial demand. As office rents start to rise as a result of under-supply of workplaces in the city, we expect to see a shift in this trend.
Shift in the market
Although Bristol saw the highest number of applications granted for office to residential conversion outside London, we do not expect all of these to be developed out. The eight storey Pithay building in central Bristol illustrates this adjustment in the market. The building was originally going to be converted into residential use. But with offices in Bristol now seeing strong rental growth, it is about to undergo a comprehensive refurbishment into a Grade A TMT office building. The building is located within the city’s traditional core. However, with financial and professional companies now moving out of this area, it is now reinventing itself as the main tech hub within the city centre.
As the map shows, residential and office values are commensurate in the centre. Residential values for new build homes are higher in the west of the city (at £525 per sq ft), namely in Clifton and Leigh Woods, whilst values in the east of the city are much lower, at an average of £325 per sq ft. The cost of conversion remains high and therefore likely to take place only in locations where there is a substantial differential between office and residential values.
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