A glance at Camden’s website shows that many upper floors of retail units in its high streets are being converted from office and storage to flats. Applications are submitted and permissions granted. It is a slow but managed changed. Office can be converted to residential or anything else but it requires permission. Where large offices are vacant or in areas better suited to housing then what’s not to like? But of course areas with vacant offices are often low value and less attractive or good for residential; there aren’t the jobs or the incomes there anymore. Some developers have achieved extraordinary things with conversions from office / employment to residential but not everywhere gets an Urban Splash; more’s the pity.
Paved with Gold, CABE’s publication, studied high streets, such as Hampstead in Camden, to assess the value added by good public realm. But the evidence that lead to this conclusion also showed that Hampstead had a balance of residential and employment, particularly in office. That keeps restaurants and cafes busy through the day, it creates a mix of uses and helps ensure that the vacancy rate of retail is 1%. There is evidence to support the approach that office is making a positive contribution to the high street and the place. But high residential values in Hampstead mean that these offices are under pressure. If they go they may not return for 30 or so years. By then the diversity, and value, of the high street will be lost. The problem with the ‘as of right’ is that it isn’t based on evidence; planning policy or lack of it is a very bad way of stimulating the economy.
This pressure to convert is coming from developers with cash and systems to turn them around easily. The FTSE subsector of housebuilders has risen 46% in the past six months despite house prices stagnating and the number of starts falling 10% further from the lowest levels. Over the past two months the top housebuilders – each £1bn + businesses – have posted record profits. Taylor Wimpey up 106% to £185.3M profit, Barratt jumped 113% to £46.1M and Berkeley up 45% to £142.2M. While achieving these profits Wimpey raised its output by just 800 units, to just fewer than 11,000 units a year or just 10% of the number of units available for them to build on – Wimpey has increased its land bank to 100,340 plots.
Is this a good story? 1/5 of their product – our homes – has come from the £280M subsidy that the government or us tax payers through FirstBuy and NewBuy. Typically, these people don’t want gardens and are more likely to want apartments or flats in central locations.
Sensibly for their shareholders, managers and top brass, housebuilders are focussing on profitability and not sales. Housebuilders are in the business of land and not house building. They have been buying up land and smaller developers cheaply but stagnant house prices means that no houses get built until a rise is sustained. By then the land value rises faster than the house prices and the availability of mortgages so land is traded and not built upon. Building larger volumes of houses will not happen, as it isn’t in their interest to sell product at anything other than the very top of the market. It comes down to availability of finance for first time buyers, downsizers and the rest.
So developers and there funders will look at London office space in good locations. They may be occupied but with break clauses, and probably on high streets. There may be few but they could be significant for the future of high streets. So land banks remain undeveloped and only higher value housing gets built.
Even if we accept that the nature of work is changing and we may no longer need large offices, just as many retailers no longer need shops, we will need diversity on our high streets.
So we might see old buildings given a new lease of life with residential use. Oversupply of office accommodation on low rents is transformed into homes for first time buyers and the like. But without the evidence we are just as likely to see the further erosion of the mixed use high street, poor residential accommodation and small flats while the number of family units built by the big boys remains pitifully small.