For some time now the UK has had a chronic shortage of homes. More recently, and especially since Covid, it has become apparent that there is too much retail space in many places. This has prompted many to suggest that more of our shops could be made into homes. We’ll overview the opportunity this might offer to those in the property industry here.

The idea of turning shops into homes is not entirely new of course. There have been planning concessions and also financial incentives that have made it possible to convert the unused space over shops, and office space into homes, for a number of years. Many developers have taken advantage of the new opportunities this has offered.

Just last week, however, much more comprehensive rules to allow the conversion of retail space into homes were brought forward in England. This will mean that more new homes may be created using a simpler prior approval process instead of a full planning application – subject to certain standards relating to space and natural light and some other limitations.

The Government has specifically said that these measure are intended ‘to revitalise England’s cherished high streets and town centres’ and ‘help support the creation of much-needed homes while also giving high streets a new lease of life – removing eyesores, transforming unused buildings and making the most of brownfield land.’

There have already been some signs that shops into homes could really take off as a concept in any case. At the end of last year John Lewis announced that it was considering the possibility of converting some of the floor space at 20 of its John Lewis or Waitrose locations onto homes.

So let’s appraise the overall opportunity of turning shops into homes:

For property developers, it almost seems a gift from the heavens. The very essence of property development is providing new, sought after and hence higher value space from old, redundant, low value space. Shops into homes seems to fit the bill perfectly.

Many parts of the country do indeed have a surplus of retail space – indicated by forests of ‘to let’ boards – alongside a shortage of homes. So there should be good demand for new residential in many cases.

A number of commercial landlords, who once virtually had a licence to print money, currently find themselves in difficult circumstances. Some will be keen to redevelop themselves or sell to developers for residential use, perhaps at very attractive prices.

Much retail space is in very attractive locations, from an amenities and infrastructure point of view at least. Some of it is in prime locations. Homes in these locations could, potentially, be in high demand.

Local authorities are also likely to be co-operative and supportive – something that developers are often not used to. They will want to keep their town and city centres alive, and of course the tax revenue rolling in. Not too long ago new retail schemes were seen as a way of regenerating a town centre .... could residential be the next saviour?

Next let’s look at a few of the potential drawbacks of retail to residential conversions:

The main drawback is very much that not all town and city centres will be attractive as a place to live. The more run down they are as retail areas, the less they are likely to appeal as residential.

Normally, when people opt to live in a town or city centre they do so to be close to places to work and amenities such as shops and leisure. If those town centre amenities, as well as offices, are no longer there (because they have been converted into homes) they may no longer be attractive as places to live. And certainly may not attract strong sales or rental values.

Some towns could find themselves moving towards a new ‘inside out’ configuration – with homes in the centre and retail on the outskirts – which could present many more challenges and problems for the future.

There is also the possibility of a conflict of uses with this kind of development too. Residential, retail and leisure uses in close proximity are not for everyone, and can clash. The Government says that its new measures ‘will provide much-needed new homes across England and attract footfall to high streets.’ But are places with a high footfall necessarily an attractive place to live?

Not all retail buildings are suitable for conversion to residential. That’s assuming a new residential scheme is a conversion rather than a new build. They are often the wrong size and shape for reconfiguration as residential space, and access can be poor. While period conversions can be very attractive, and command a price/rental premium, not all town centre retail buildings are period buildings.

Office to residential conversion schemes have been going on for some time of course. Although there are many good schemes, there have also been some pretty poor ones too which provide cramped and substandard accommodation for residents. Quite apart from the human implications of this, low quality retail to residential schemes could serve to undermine nearby good schemes, and in fact the viability of this whole new opportunity.

Most people in property will agree the conversion of redundant retail space into new homes does indeed present an opportunity. However, it is clear that there are also many drawbacks which will need to be addressed if shops into homes is to achieve the objective of not only revitalising town centres but providing more homes too.

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