Office moves to suburbs could kickstart permitted developments – RICS

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  • 30/07/2020
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Office moves to suburbs could kickstart permitted developments – RICS
The Royal Institution of Chartered Surveyors (RICS) believes demand for office space is likely to fall throughout the next year and could be pushed out of city centres into suburbs.

 

As a result, it said this switch may be able to satisfy demand for more housing through permitted development rights (PDR) but warned that the current proposals were not satisfactory.

Perhaps unsurprisingly given the coronavirus pandemic, the RICS second quarter commercial market survey found significantly falling demand among retail and office space, with negative net ratings of -86 per cent and -79 per cent respectively.

Even industrial unit demand fell by 13 per cent, the first time this sector has seen a negative response since 2012, RICS said.

These findings were echoed in rent predictions with net balances of -85 per cent of retail respondents and -62 per cent of office landlords predicting rents will fall further.

And there was almost unanimous belief that businesses will scale back their office space requirements in the coming two years.

“When respondents were asked if they felt demand for office space in suburban locations may rise in place of urban centres over the next two years, 64 per cent felt this shift would occur,” RICS said.

“This not only suggests there could be some significant changes in store for the office sector moving forward, but also interestingly, a potential driver for regional high streets.

“Anecdotal evidence also suggests there will also be a shift to higher quality office space, with more focus on wellbeing and sustainability,” it added.

 

Permitted development opportunities

The report found there was some anecdotal evidence of opportunity and interest in secondary units, potentially for conversion to housing and from some independent businesses looking for space in local high streets.

This is perhaps indicative of a broader shift around commercial location in the wake of the pandemic, RICS added.

However, while changing from commercial to residential premises may benefit property owners, the body warned that proposals from the government to grow PDR conversions risked supplying poor quality homes.

Research conducted by UCL and the University of Liverpool for the Ministry of Housing, Communities and Local Government found less than a quarter of homes built through permitted developments meet national space standards.

Some properties produced under PDR were just the size of a car, while many had insufficient natural light.

 

Proposals ‘not right’

RICS head of UK government relations Hew Edgar echoed these concerns, noting the reduction in office space demand could be used to counter demand for housing, which the government has contemplated through loosening PDRs.

“However, the proposals are not right and have raised concerns around substandard homes, including building and space standards, all of which were highlighted in a 2018 RICS report,” he said.

“It is possible to deliver viable office-to-residential schemes through the more stringent planning permission process, this would maximise the existing asset base in a sustainable way, providing affordable homes in close proximity to pre-existing facilities while contributing towards community and wellbeing.

“New community hubs developed through repurposing and reusing building stock is greener, will support supply chain management in construction, and kick start SME activity; all of which contribute to a stronger and quicker economic recovery,” he added.

RICS economist Tarrant Parsons highlighted that with demand from both occupiers and investors falling sharply, respondents now anticipate rents and capital values will come under downward pressure while the market adjusts to a drastically changed economic environment.

“In particular, the recent shift into remote-working raises many questions across the office sector, with respondents expecting businesses to re-evaluate their office space requirements over the next two years,” he said.

“On a brighter note, the outlook is already showing signs of recovery across industrial sector, which remains set to benefit longer-term from an acceleration in the growth of ecommerce.”

 

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