The PDR Window Has Been Flung Open, How Long Will It Last?

Posted by Knight Frank Newcastle on 1st March 2024 -

Relaxations to Class MA Permitted Development Rights (PDR) will offer developers unprecedented opportunities to convert commercial buildings into residential spaces using the quickfire ‘Prior Approval’ process. Many more commercial buildings could now be eligible for a change of use to residential via this streamlined planning route.

Of course, we’ve been here before. Back in 2013, when permitted development was first introduced for the change of use of office buildings to residential, it offered maximum flexibility but with scant regulation or control. This perceived free-for-all often led to developments with questionable quality, which lacked the provision of adequate daylight or internal space standards, amongst other things.

Over the last decade, we’ve been on a journey with PDR. The government has brought in several iterations over the last 10 years in an attempt to strike the right balance between using permitted development as a vehicle to support housing delivery, while also keeping appropriate standards in place. With this week’s changes, it finally seems that the right balance has now been struck.

From March 5th, the removal of the 1,500 square meter floorspace cap on conversions means there is no longer any size restriction imposed, while the requirement for a property to have been vacant for three months before submitting an application has also been eliminated.  The relaxation of the floorspace cap and vacancy requirements means that more good quality homes can now be delivered through PDR, ensuring it can be a significant contributor to high quality housing delivery across the country.

Blanket Article 4 Directions, which councils have previously used to block permitted development rights across entire boroughs, are also no longer allowed. The government is intervening more forcefully where appropriate to keep opportunities open in areas deemed suitable for conversion under the new Class MA rights.

With all these latest tweaks now in place, it finally feels like we have reached an appropriate balance between providing developers and investors with ample opportunity, while also ensuring that the homes being delivered are of a high-quality.

Major opportunities

These changes provide a major opportunity for landowners to give commercial buildings a new lease of life, and even unlock wider redevelopment potential.

It could certainly help enable the repurposing of secondary office space in locations facing declining demand for traditional workspaces. While the prime office market is seeing heightened levels of demand, particularly for amenity rich and highly sustainable workspaces, demand for offices that fail to meet revised and more exacting customer expectations is in decline.

In London, for example, our research shows that just over half the office stock currently falls below the minimum EPC rating of C. Around 140 million square feet of space needs upgrading and futureproofing, providing a major opportunity for conversion under the expanded permitted development rights.

Of course, the changes do not work for all buildings and areas, but they do provide targeted help to rejuvenate some office stock with poor energy efficiency, allowing new residential life to be breathed into tired buildings located in secondary office markets experiencing growing vacancy rates.

This policy change can also significantly increase asset values; our Land team is advising on an office building where the price significantly increased this week based on the policy updates permitting change of use to residential. One of the key drivers to this is that the policy does not impose affordable housing obligations.

Why choose the PD route?

Obtaining normal planning consent can be time consuming and risky, often taking up to two years, however the prior approval process often delivers results within eight weeks, making it significantly faster. This streamlined process offers a cheaper route to securing consent, compared to a traditional application, which comes with substantial costs attached.

Traditional planning applications can have up to two-dozen requirements that need satisfying before permission can be granted; with prior approval, there are just five or six. The nature of the streamlined process will not only save time and money, but it provides more certainty of outcome too. Developers and investors can enter the process with greater confidence of being successful in securing consent.

Permitted development rights can be used as the first step in wider development strategies, providing greater flexibility regarding options and schemes that can be progressed, while the removal of the floorspace cap has expanded opportunities across a broader range of properties, opening up scope for projects not previously possible.

The updated rules provide a crucial window of opportunity to implement permitted development for use as part of a wider redevelopment strategy but, as we have seen since 2013, local authorities could seek to close it off.

While the latest permitted development changes offer maximum flexibility for conversions while maintaining improved technical safeguards, there is a big question mark over how long this opportunity will last. A future change in government could prompt a partial or wholesale reworking of the policy, and many councils will likely move swiftly to explore avenues for resisting or blocking conversions locally. For developers looking to capitalise on the changes, the time to act is right now.

Source article from The Landsite member Knight Frank

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