We may have experienced the first real winter for a number of years but this has not had an adverse effect on the market. A cold biting wind normally leads to cancelled viewings and a lack of appetite to move but this has not been the case in The West End. This can be put down to a number of factors but personally I believe that the quality of stock available and the high numbers of instructions coming not just to us but to all agents across the West End has tempted many people into thinking about their next move.
Right now more so than ever the West End appears to be a number of consecutive building sites. It seems impossible to walk round consecutive corners in central London without seeing scaffolding and hoardings.
While some is new build the majority is the refurbishment of existing buildings that are transformed from commercial (mostly offices) to begin a new chapter in History as residential of hotels. In many cases this is coming full circle as the properties were originally built as houses.
The reason for this? For a number of years now residential has been outperforming the office market.
There has been a trend to change usage in order to maximise the return on Landlords/Vendor's assets (in some cases by as much as a third). Westminster in particular has favoured this change of use primarily for three reasons;
Firstly a number of West End offices have planning constraints against expansion and many are in listed buildings, making upgrades to 21st century business and health and safety expectations unfeasibly expensive. Working patterns have also changed meaning that open floors are preferred to split level offices that are better suited to residential.
Second, the profit from luxury apartments is much bigger. Residential conversion in the West End, particularly Mayfair, St James and Belgravia, is worth on average £3,000 per sq. ft. The value of prime offices is just below £2,000 per sq. ft.
Finally there is a greater need for residential across the capital as a whole but from an on-going regeneration perspective mixed use buildings create a better environment and studies have shown help to reduce crime.
As many of you might well be aware a recent change in the law designed to support economic growth has been passed that grant new permitted development rights for change of use B1 office to C3 residential without planning permission. However before you start evicting your office tenants and designing your new apartment it is worth noting that all but four London councils have decided to seek exemption and Boris Johnston has done so on behalf of the core office districts that cover most of central London.
At present Westminster has begun to review its pro conversion stance which comes as little surprise due to the number of conversions that have taken place over the past ten years. Some figures states as much as in total between 2001 and 2011, over 3.9m sq. ft. of West End offices have been redeveloped into homes. To give you a visual idea of this scale this is more than Three Shard buildings! A further 1.3m sq. ft. was converted to other uses such as hotels and leisure which represents over one Shard Building. While these figures are astounding in their own right perhaps even more is that over 600,000 square foot was converted to residential in 2011 alone.
So what does all this mean for the West End of London other than noise and disruption while the works take place?
Ultimately it depends on your position. If you have office stock in your portfolio and have not yet looked into the feasibility of change of use now might be a good time to do so. You have three years to implement permissions once received so it is not something you have to act on immediately and by having the permission alone it increases the capital value. It is also worth noting that with all these new conversions not only does it mean greater competition for your property be it for rent or sale it might mean that you should consider engaging in some refurbishment of your existing residential properties just to keep up to
standard with all the new stock coming to market and to protect your rental income.
