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What are the best ‘UK high street’ property development opportunities?

UK High Street in the Evening

 

Like many property professionals, you might have dabbled with buy-to-let’s for a while, but as I’m sure you’ve found, it takes a long time to replace your income with them. That’s why many property professionals are turning to more profitable commercial property development opportunities. 

In 2022, the high street presents one of the best property and investment opportunities. From the shift to online to a lack of cash flow, the UK high street has changed dramatically over the last two years. This has opened up a range of options for different revenue streams.

In this article, we explore what’s changed on the high street, what the best high street development opportunities are, and how to find them.

 

What’s changed on the high street?

The past two years have seen a big change in the high street, with many businesses adapting or even closing. 

These businesses have often been closing due to a lack of cash flow caused by rising inflation, spiking energy costs, and the cost of raw materials. What’s more, all the Government covid reliefs are now withdrawn and retailers need to reimburse landlords for rent they didn't pay through lockdowns.

In fact, it’s probably fair to say that the pandemic changed the high street forever. Retailers have to manage multiple sales channels to survive and to meet new online order demands, retailers need logistics space such as warehouses.

This means that some retailers may now have different requirements, which opens the door to re-gear leases and make changes to the retailers' demises.

In addition to retail, the way offices are used (which are often high street uppers) has changed, with people now expecting some level of hybrid work from home. 

These trends have opened up more opportunities for developers and investors - in fact, it is a great time to secure profitable sites.

However, this has also created a lot of competition, so finding and assessing these sites quickly is now key to getting ahead of competitors. 

 

The 7 best high street property development opportunities

Below, we will discuss seven possible development opportunities, primarily using the new permitted development rights.

 

#1: Opportunities to create apartments above commercial (Class G)

Class G - Class E is a useful permitted development right. As long as you meet a few conditions, you can do this anywhere within England, subject to prior approval. This works for anything in the new use Class E - including commercial shops, gyms, and Sui Generis, such as betting offices. 

Assuming you meet the criteria, you can create up to two residential apartments above the commercial level. 

 

#2: Opportunities to convert commercial into HMOs (Class L)

Permitted development rights give you the ability to take Class L to small C3 to C4 (HMO), or indeed, a C4 HMO and convert that back to a single dwelling. 

This becomes really useful when you turn a Class G into two commercial units and then develop four flats above the commercial - effectively into an HMO. 

 

#3: Opportunities for the rear of retail (Class MA - commercial to residential)

There are a few different ways to use Class MA. If the property is in a primary high street, you can convert the rear of the building - subject to minimum requirements. If it is not in a primary high street, it can be used across the whole of the ground floor.

There tends to be a lot of space behind retail, which can make these great conversion opportunities. However, please bear in mind noise considerations - such as industrial fridges, machines and equipment. It’s key to figure this out before putting a bedroom next door!

 

#4: Opportunities for smaller retail units for tenants

Let’s not forget about the smaller retail units, for example, barbers - the new flexible class E presents a whole range of ways to rent them.

They are affordable - and this is much needed for commercial tenants. Also, we often find these tenants don’t need all of the space - as they usually mainly want the frontage. This could provide you with an additional revenue stream - often with long contracts and regular payment. 

 

#5: Opportunities for combining use classes (mixed use development)

Alternatively, you can even combine use classes. This will depend on whether you’re in a conservation area or not. As an example, you could combine Class G and Class L to create Co-Living HMO’s above the ground floor, and single lets to the rear.]

In fact, you can really maximise your income with co-living HMOs. In the example below, the developer was able to take one building and more than double the revenue of that property entirely through permitted development rights.

 

Before development

3 Bed flat

Retail unit

 

 

£18,500 per annum

After development

5 Bed HMO

1 Bed flat

Retail unit

 

£43,550 per annum

 

👉Interesting side note: What was acceptable to tenants years ago will struggle to rent in today’s market. The competition has changed and consumers' demands have increased. That’s why it’s key to upgrade your product and future-proof your portfolio. This not only boosts your occupancy up to 100% but also commands much higher rents. 

 

#6: Commercial tenant Opportunities

It’s also worth considering whether you can renegotiate and demise leases to retailers that now have different space requirements. In addition, the space above this type of unit is now unlikely to be needed by the retailer and could be converted under Class G or Class MA. 

Retailers have the benefit of being released from the repairing obligations of unused upper floor space under the lease and no longer need to pay rates for that space. This can be a huge win-win. 

 

#7: Opportunities in flexible serviced office accommodation

Finally, there is a huge rise in flexible serviced office accommodation supporting the move to hybrid and flexible working - these typically can drive very high rents.  Any Class E building can be used for this, including the edge of high street retail units.

In summary, when considering high street commercial conversations, the key thing to consider is how you can reduce the overall commercial element and increase the residential space, (plus improve and upgrade), so it’s more beneficial for tenants.

Now that you have some ideas for high street conversions, here are some pro tips on how to find them at speed.

 

How to quickly and easily find high street development opportunities

Using a tool like Nimbus Maps, you can easily narrow down your search to find commercial buildings with enough sq ft to convert. You can select your pre-defined criteria and Nimbus will shortlist the right fit properties for you.

 

Nimbus Maps Filters Screenshot

 

Without the tool, you would never have guessed this small barber's shop had such a huge development space behind it. In fact, with Nimbus’ building footprint tool, you can see the space is 170 square meters.

 

Nimbus Maps Site Area Screenshot

 

Nimbus will also help you to drill down further into the square foot rates so that you get a good sense of the breakaway value for what the apartments are worth. 

As commercial property professionals seek to improve their site sourcing strategies and earn more fees, the benefits of using a property data intelligence tool cannot be overstated. 

Tools, such as Nimbus Maps, offer you the chance to find the best sites and the opportunity to virtually inspect every aspect from planning histories to values and everything in between. 

To see for yourself, you can start a free trial here.

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