Should you be converting commercial property to residential property?

Up until recently, the UK government had relatively strict restrictions on converting commercial spaces, such as high street retail premises, warehouses and industrial units into residential property. However, changes to the law in 2015 have made it much easier to convert commercial to residential property.

It’s hardly surprising: after all, it’s no secret that the way our high streets operate is changing. The move to online shopping has meant that the face of the high street in many towns and cities across the UK is markedly different than just a decade ago. As a result, many people investing in UK property are looking for opportunities to convert commercial to residential with the hope of enjoying lucrative returns on these types of conversion.

Can I turn a commercial property into a house?

Since 2015, many commercial buildings have been eligible to be converted into homes. However, there are certain exceptions. It’s always worth checking if there are any stipulations which prevent a commercial property from being turned into a home prior to starting any work. As a general rule, exceptions include:

• Listed buildings.
• Buildings classed as being within safety hazard areas (such as those on former industrial estates/factory sites).
• Buildings situated on designated areas of outstanding natural beauty.
• Buildings within national parks or conservation areas.
• Buildings in areas of scientific interest.

Asset classes UK: identifying the use class of a building

All commercial UK buildings are placed in a specific use class, based on their current use. When applying to convert commercial to residential, you will be required to apply to change the use class of the property.

When investing in UK property, some people confuse applying for change of use class with applying for planning permission, when the two applications are separate. Some examples of use class categories include:

• Class B: general industrial, storage or distribution.
• Class C: residential properties, care homes and other places of habitation (like B&Bs and hotels).
• Class E: commercial, business and service
• Class F: local community and learning
• Sui Generis: in a class of its own

Can I convert shop into residential?

It can be relatively easy to convert a shop into a residential property. In fact, many people currently investing in UK property are on the lookout for commercial buildings which can be quickly converted into a home or even multiple-occupancy apartments. Prices in the commercial property market are quite competitive at present, which means you could enjoy great value for money and a healthy return on investment.

In addition to this, shops are usually well-positioned in proximity to local amenities. This means that once the shop has been converted, it makes it desirable to potential future buyers or tenants.

Do you need planning permission to change a shop into a house?

Since 2013, the law has stipulated that some kinds of commercial property could be converted for residential purposes without the need for full planning permission. This is known as Permitted Development Rights, or PDRs. Permitted Development Rights are granted through parliament, as opposed to planning permission, which is overseen by the relevant local authorities.

Most shop conversions don’t require planning permission when it comes to converting from commercial to residential, provided the building is no larger than 150 square metres. You may require planning permission to change a shop into a house if you wish to change the exterior of the building. The same applies if you wish to move any doorways, alter any windows or extend the building.

It’s worth noting that even if you do require planning permission to convert a shop into a residential property, you’ll be likely to get it if the building is currently not in use. The current National Planning Policy Framework stipulates that the reuse and repurposing of empty buildings is a priority.

Can I invest in commercial to residential conversions via a real estate investment trust?

Real estate investment trusts are public companies which own and finance income-producing properties on behalf of their investors. Some of these companies provide an easy way to invest in commercial to residential conversions without the investor having to go through the rigmarole of applying for planning permission or use class changes.

Are there grants for converting commercial property to residential?

If you’re considering investing in UK property and looking to convert commercial to residential, there are several ways to fund both the purchase and development of the premises. It’s possible to combine a mixture of commercial and development finance options into a single arrangement, although this will depend on how your lender (or lenders) are willing to work with you.

Alternatives include taking out self-build mortgages or bridging loans. The best way to ascertain what sort of funding options are available to you is to speak to potential lenders.

Convert commercial to residential: find out more with PropertyData

Converting commercial property to residential property can be a lucrative way to enjoy a great return on investment - however, it’s important to understand the processes involved. You should also be wary of any potential pitfalls (such as converting prior to ascertaining whether you need planning permission) that could eat into your profits.

For further information, why not sign up to PropertyData for a free two-week trial today? You’ll gain access to a wealth of tools and information, including up-to-date property prices, a rental yield calculator and information on the investment.