Understanding Change of Use Cases in the UK Property Market

In the property market, a “change of use” refers to the process of altering the designated purpose of a building or land. This could involve converting a commercial space, like an office or retail unit, into a residential property, or transforming an industrial site into a mixed-use development. Change of use cases are becoming increasingly common in the UK as developers and property owners seek to adapt existing spaces to meet the evolving demands of the market, as well as the growing demand for new homes. 

Here at Centrick Invest, we believe more and more property developers will be looking towards property change of use, especially after the latest update from the government regarding their reconsidered housing targets. After all, to create 1.85 million new homes, there is more pressure on developers than ever to find good opportunities to build the homes of the future.

Why Are Change Of Use Cases Necessary?

The UK property market is under immense pressure, driven by a significant imbalance between supply and demand. The increasing number of tenants and homebuyers searching for properties has far outpaced the available stock, with the Centre For Cities suggesting that the country needs 4 million more houses. Several factors have contributed to this severe imbalance, namely the fact that the number of UK households has surged by 16% since 1996. Unlike many other large economies such as Japan, France, and Italy, where populations are declining or stabilising, the UK’s population continues to rise steadily. It is projected to exceed 74 million within the next 15 years up from the existing population number of 67 million. 

Additionally, the emergence of the ‘20 minute neighbourhood’ or ’15-minute city’ concept is reshaping urban development. This idea focuses on ensuring that essential amenities—such as GP surgeries, supermarkets, vets, and coffee shops—are all within a 15-minute walk from residential areas. As a result, developers are keen to repurpose vacant properties in prime city locations to meet this demand for convenience and proximity, maximising the impact and value of their developments. But it’s not just established locations that developers are interested in: developers are preparing to invest in pockets of land that are emerging and where amenities are being planned, ready to build the property hotspots of the future.

The Rise of Property Change of Use

In response to the growing housing demand, many buildings and plots of land across the UK are being converted into residential units, providing much-needed high-quality housing. This trend is evident in towns and cities nationwide, where former shopping centres are being transformed into flats, old churches are being repurposed into unique apartments, and vacant land is being developed into large residential complexes. Such change of use projects, often referred to as permitted development, play a crucial role in addressing the housing shortage, namely because these previously utilised plots and buildings already exist in built-up areas. In fact, Habitat For Humanity GB estimate that there is enough vacant commercial space owned by Local Authorities across the country to create 19,500 residential dwellings – this isn’t including vacant brownfield plots, and privately owned commercial structures of which Habitat For Humanity estimate there are 165,000 of.

Commercial to Residential Conversions

Commercial units are the most common type of property converted into residential dwellings. During the 2022-2023 period, there were 9,492 change of use cases resulting in new residential units, with office-to-residential conversions making up the bulk of these cases. In fact, 7,903 office spaces were converted into residential properties during this time, highlighting the trend of repurposing commercial spaces to meet housing needs. 

It’s no surprise that developers are increasingly converting commercial spaces into residential homes, as these units are typically well-connected to towns and cities and often include parking. What’s more, commercial spaces are becoming less popular. According to management firm Gallagher, one-fifth of businesses plan to downsize their offices, over a third are considering shared office spaces, and 7% have already relocated due to post-pandemic work trends. This decline in demand for commercial properties, combined with the growing need for residential units, makes converting commercial spaces into homes an increasingly attractive option for developers.

Brownfield and Greyfield Land: A Key Opportunity

Another significant opportunity for developers exploring new use cases is brownfield land. Previously utilised for industrial or commercial purposes, brownfield sites offer immense potential for new residential developments. A 2022 study highlighted the critical role of brownfield land in shaping future housing, with CPRE identifying 27,000 hectares available for development—enough to create 1.2 million homes.

The UK government acknowledges this potential and is committed to utilising brownfield sites for new housing. Over the next five years, the government plans to deliver 8,000 new homes on brownfield land, supported by a £180 million investment through the Brownfield Release Fund 2. However, developing on brownfield sites presents challenges, including ecological concerns, site contamination from previous use, road access, and utility connectivity. 

In addition to greenfield and brownfield sites, there are also greyfield sites. Traditionally, this term referred to underutilized land and buildings within towns and cities. However, it has sometimes been used more specifically to describe potential development on car parks and rooftops. More recently, the definition has broadened to include disused buildings such as empty shopping centers. Greyfield sites offer a similarly significant opportunity as brownfield sites, with Knight Frank identifying 11,000 greyfield sites capable of supporting up to 200,000 plots.

If you’re considering developing on brownfield land, don’t hesitate to contact the Centrick team. Our land and development consultancy excels at identifying sites with long-term potential and understanding the local market, helping landowners secure the highest land value while assisting developers in procuring their next project.

Regional Trends in Change of Use

Change of use cases are not evenly distributed across the UK, with certain regions experiencing more change of use activity. In fact, the highest concentration of change of use cases during the 2022-2023 period were in the South East, South West, and London, while regions like the North East, Yorkshire, and the East Midlands saw far fewer conversions. Here’s a breakdown of change of use cases by region:

Key Considerations for Change of Use Projects

Embarking on a change of use project requires careful planning and a thorough understanding of various critical factors. Here are some key considerations:

Site Suitability: Assess the property’s location, accessibility, and infrastructure to determine if it’s suitable for the intended new use.

Structural Assessments: Conduct detailed evaluations to ensure the building’s structure can support the proposed changes, identifying any necessary renovations or modifications.

Functional Adaptation: Plan the layout and design to align with the intended use, keeping in mind zoning requirements, safety regulations, and accessibility.

Financial Viability: Analyse the project’s economic feasibility, including cost projections, potential returns on investment, and financial considerations tied to the change of use process.

Explore Centrick’s Land Development Offerings

At Centrick, we provide a comprehensive in-house service that guides you through every stage of your property development journey, from initial planning advice to the final sale or letting of the completed project. Our team specialises in land sales and acquisitions for our retained clients, uncovering new development opportunities and offering expert advice on every aspect of the development process. This includes everything from acquisition and planning to product mix, density considerations, and crafting a strategic disposal or development plan.

Our land team possesses a keen eye for identifying promising development opportunities, backed by an in-depth understanding of the UK land market. With extensive knowledge and experience, we are adept at navigating complex issues to maximise the value of any asset, whether it’s in an inner-city, suburban, or rural setting. Drawing on this expertise, we’ve created the “Land: How To Buy It, How To Develop It, How To Sell It” guide, designed to support land buyers and developers at any stage of their journey. Inside, you’ll find insights on building for the future, market trends, green building regulations, and the pressing need for new homes across the UK. Download your copy below!