RSS FeedRSS Feed

How viable are office redevelopments?By: Tyson Sheppard

How viable are office redevelopments?Development is fraught with risks and all developments are as unique as the sites on which they are built. Every development, especially a former office site needs to be assessed for individual viability before any work takes place.

So how do you go about this?

The economy in most parts of the UK appears to be recovering, but profitability as well as planning policy continues to put pressure on the deliverability of development projects. Therefore assessing each site on a number of factors and against the local market need is crucial to ensure the development not only receives planning permission, but can also be built and sold or let to meet end financial objectives.

Sites that may have been earmarked previously for a specific use may now have a better future especially given recent changes in planning legislation, which now allow B1(a) office units to be converted into class C3 residential properties without full planning permission.

Owners of commercial buildings are therefore being provided with greater flexibility to utilise their buildings or consider development. Meeting with local planners to discuss the potential development of commercial properties may unlock new options. This is especially important looking ahead to 2018 and The Green Deal, part of the Energy Act 2011. The two aspects of the Act that will have the greatest effect on commercial property are the Private Rented Sector Regulations (PRSR) and the Green Deal. Although these are dealt with separately, they are interrelated. Once the PRSR is in force, buildings must be raised to a minimum energy efficiency rating of E, no later than 1 April 2018,  before they can be rented.

When considering the cost to upgrade the energy efficiency of commercial buildings, which fall under the E rating, it may be more cost effective to convert to residential. It is therefore vital to do your research and if necessary take advice on the viability of your scheme before too much is invested going down a particular route.

So what are the key factors that can affect the viability of a development site?

Although the planning system has been relaxed to encourage the change of use from commercial to residential, there are some works which will still require full planning. Under the recent changes, no alterations can take place to the external elevations without planning permission and any works within conservation areas or to listed buildings will still require full listed building consent. It is also important to note that all conversion works will be subject to Building Regulations.

The location of the development will need to be considered carefully. For example the conversion of office to residential space may not be sustainable if the office is located on a business park. There will be no schools, parks or other amenities in close proximity and this will have a negative affect on the desirability of the proposed accommodation.

Paying too much for a site or property is a curse in the competitive property market. Whatever is spent on the site has to be recovered with the sale price or it comes off the bottom line.

The layout of the space can have an effect on the viability. Bringing natural light to some parts of the building may prove to be a difficulty and major structural alterations may be necessary for making the space more useable. These issues can add considerable time and cost to a project and ultimately make it an unviable option.

Underestimating the costs of work is a typical pitfall. It is very common for figures to be added up incorrectly, or for parts of the job to be missed out of overall calculations. It is important that figures and levels of specification are carefully checked to determine whether the specification for some materials can be lowered to reduce costs and increase the viability of the project.

Delays can be caused by the weather, building contractors, suppliers or by the planning system so building a realistic timeframe for the work to take place and adding in the potential for these factors is important.

Finally VAT should be a consideration of all sellers, developers and buyers and professional advice should therefore be sought before proceeding with any works.

At the end of the day, it is important for developers to know their local market and end user. Any subtle shift in trends may impact on the success of a development or, where they can set trends, will add value.

Anyone considering the purchase of a development property should really seek professional advice from the outset, as there are many factors that can affect the decision making process that can be difficult to spot when you are close to a scheme.

About the author

Tyson Sheppard, BTFTyson Sheppard is a Graduate Surveyor with BTF Partnership

Features March 2014

Click here for more features...

Commercial Property Events

Have you any commercial property events you'd like to tell us about? It could be networking, exhibitions, seminars, industry lunches or sporting fixtures. We will list them for free. Just email with the following details: Event name, date, time, venue, cost, booking info and a brief description of the event.

Commercial Property Jobs

To list your property job vacancies on Property News. Email:

Sign up to our free e-alerts for all your property news and views.
Follow Property News on Facebook Follow Property News on Twitter Follow Property News on Google+ Follow Property News on Linkedin Property News RSS Feed