According to new research, the number of commercial to residential change-of-use applications has surged in the last two years. Why have landlords taken up this opportunity, and how can you incorporate this into your own portfolio plans?
Direct Line landlord insurance has published new research that shows a surge in applications to convert commercial, business, and service premises (such as office spaces and retail outlets) into residential properties. Furthermore, there has also been an increase in approvals for this type of application.
The data shows a 63% increase in these change-of-use applications between 2021-2023, with approvals increasing by 60% over the same period. For 2024, the number of applications is set to exceed last year’s figure by a staggering 20%, which shows your landlord peers are seizing this property investment opportunity.
Why landlords choose commercial to residential developments
The supply and demand disparity has been a main contributor to the ongoing rental price increases we have seen over the last few years. Whilst this continues to benefit landlords and property investors, the need for more rental homes is undeniable.
In contrast, many businesses now opt for remote-working teams, and the transition to online shopping has seen many retail properties close, leaving commercial properties underutilised or vacant.
This gap means landlords now have a new opportunity to explore. For property investors who own or purchase suitable commercial, business and service premises, you can apply to convert these properties into residential property. Not only will this offer a new stream of rental income for landlords, but there is plenty of opportunity for higher rental incomes and long-term stability.
Where are investors converting commercial property into residential?
Finding the right commercial property to turn into a rental property is essential, but it’s just as important to focus your search in the right area.
The report shows that, between 2021 and 2023, London has seen the highest growth rate in commercial to residential change of use applications. Seven of the London Boroughs feature in the Top 10 list, with Haringey taking the top spot with an impressive 100% increase.
Outside of the capital, Somerset (90%), Wakefield (70%), Bristol (68%), Sheffield (58%), and Milton Keynes (57%) also saw impressive levels of change of use application approvals. In these areas, office spaces, retail outlets, and warehouses have been repurposed to help keep up with growing levels of tenant demand.
|
Region |
% Increase in Approved Change-of-Use Applications |
|
London Borough of Haringey |
100% |
|
Somerset |
90% |
|
London Borough of Enfield |
90% |
|
London Borough of Merton |
89% |
|
London Borough of Croydon |
85% |
|
London Borough of Ealing |
78% |
|
London Borough of Lewisham |
75% |
|
London Borough of Hackney |
73% |
|
Wakefield |
70% |
|
Bristol |
68% |
Industry comment
The Head of Landlord Insurance at Direct Line Business Insurance, Jonny McHugh, commented on the findings:
“The property market is constantly evolving and as demand for residential property continues to soar, it has increased the attractiveness of converting commercial units for domestic use. By converting underused commercial properties into residential units, landlords can help maintain their revenue streams and future-proof their investments.”
Your next steps
Whether you already own a suitable commercial property to convert or you’re looking for the right property investment, our experts are here to help. With experience and expertise in all types of complex commercial and buy to let property finance, we can discuss the type of mortgage you will need and what the process will involve.
For more information on these types of applications, get in touch with our team here or call us on 0345 345 6788.
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