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How to find the most profitable commercial conversion opportunities in 2022

Among declining property values, the relaxing of decades-long planning regulations, and the continued housing crisis, today’s property market presents a unique opportunity for those considering commercial conversions.

In fact, there’s never been a better time for finding commercial conversion opportunities.

This article explores how recent changes to permitted development rights opens up more opportunities for commercial conversions and how you can find the most profitable sites to invest in today.


Adapting to changing market conditions

While there’s a degree of uncertainty, it’s predicted that property prices will cool off this year due to a range of factors such as; interest rate increases, fewer mortgages being agreed upon, and double-digit inflation affecting the cost of living.

When changes such as these are outside of your control, it makes it even more critical to “control the controllable”.

Here are a few key things you can ‌have some control over:

  • Purchase price - Buying off-market will reduce the amount of competition for the property, as you might be the only interested party and able to negotiate a lower purchase price. Look for tools that will help you find off-market sites.

  • Conversion costs - We recommend that you work with a design and build team that has been successful with similar conversion projects before. We often find they are likely to be quicker, more cost-effective, and more accurate with their predicted development costs. Some tools can help you connect with planners, architects, and developers in your area for your specific strategy.

  • Selling Price - Make sure you understand the best price you can expect to get when you sell the conversion. Some tools allow you to see comparables for similar projects in the same area. 

👉Bonus tip: Have more than one exit strategy. For example, the completed conversion may be more profitable if it’s kept in your portfolio and rented out rather than sold or vice versa. In a changing market, you need to be flexible.

The big shift in commercial conversions

In addition to the evolving economic market, stakeholder needs have changed and people are interacting with space differently - such as working from home more - and at offices less.

Plus, many more opportunities and sites have become available due to businesses sadly closing during the pandemic. 

Interestingly, this coincides with some major changes to use classes and Permitted Development (PD) rights. The new use class order brings many historically different uses into ‘Class E’ where PD rights now apply (for example, there previously weren't any PD rights that applied to doctors' surgeries etc.).

These new PD Rights are much broader than the old Class G, Class M, and Class O, and because they are now approximately 10 years old, some low hanging fruit has been unlocked. 

Let’s explore these further.

New classes. New opportunities.

Until recently, converting a commercial building to residential use meant tackling extensive planning applications. And in many circumstances, it just wasn’t possible. 

The good news is, these changes to permitted development rights have now opened up a new playing field of commercial conversion opportunities for property professionals seeking profitable investments.

Here we’ll round-up (in brief) some of the key opportunities so you know exactly which commercial conversions you should look for in 2022:

The Top 10 New Commercial Conversion Opportunities

From commercial

To residential

New use class order: Class E replaces use classes A1, A2, A3, B1, B2, D1 and D2 and applies to buildings between 2013 and 2019.

The introduction of Class E means that you can now change the use of any building falling under Class E to any of the other uses. 

Class MA PD rights

Class MA takes the opportunities of Class E one step further. You can now apply for prior approval to convert a property in use class E to residential, under Class MA. 

Basements 

There are a couple of requirements here in terms of natural light and minimum space requirements.

Restaurants 

You can now convert restaurants to residential under the new PD rights. 

Sui Generis - such as betting shops, payday loan shops, hot food takeaways.

Up to 2 flats may now be permitted for Sui Generis betting shops and payday loan shops.

Shops 

You can now create as many flats as you want above a shop - subject to minimum space and natural light requirements.

Ground floor retail 

You can now convert the whole of a retail ground floor to residential - as long as it’s not in a conservation area.

Rear of shops in conservation areas

If it is in a conservation area, you may be able to convert the rear of the shop - subject to space and natural light requirements.

GPs, dentists, and nurseries

These can now be converted to residential. Often they used to be residential, so it can be relatively simple to convert back. 

Mixed-use 

Mixed-use now falls into Class E - which means you can now apply for permitted development rights.


📕Read more on the new permitted development rights now available in 2022 in our new blog here >> Permitted Development: Commercial conversions strategies for 2022

Finding the best commercial conversion opportunities

This big shift in commercial conversions has resulted in the property industry being awash with creativity. But it can be like looking for a needle in a haystack trying to find sites where the PD rights apply, where there aren’t any restrictions, and where it’s likely to be profitable. 

It’s also difficult to know what a reasonable purchase price is and predict an accurate sale price once converted. They are often not on the market, and those that are on the market sell at less competitive prices.

The best approach is to find at least 100 sites that meet your strategy for conversion. For instance, if your strategy is office to residential conversions, you can send letters to the owners of all 100 sites to see if they will sell. Typically, 10 might reply, 5 might be interested and 1 will progress to a sale. 

This approach significantly increases your chance of buying the right site at the right price and making a successful and profitable conversion.

Need to speed things up? Nimbus Maps can highlight 100 suitable sites in minutes and allows you to export the details (including the ownership details and addresses) to an Excel file. You can then set-up workflows to send a simple letter campaign out in days and start connecting with willing sellers ‌quickly.

It does this by highlighting every site in England and Wales that meets the criteria of a commercial conversion in terms of planning and permitted development rights. Moreover, it shows anything that’s calculated at a 15% or more return on cost. 

 

Final tips to find the best commercial conversion opportunities:

  • Step one: Use a tool like Nimbus Maps to identify on-market and off-market PD sites

  • Step two: Check if it’s an exception - e.g. listed or in a flood zone. 

  • Step three: Identify the building’s use class and if it has permitted development rights. 

  • Step four: Uncover any risks or planning constraints.

  • Step five: Work out a budget and understand the purchase and exit value.

  • Step six: Connect with sellers and send out letters.

  • Step seven: Arrange finances and make your offer. 🚀


Nimbus Maps can help with all of this! See our unrivalled property data and intelligence platform in action: Watch a demo.

While you might already have access to a property data tool, are you confident that it’s giving you that competitive edge - speed, finding sites faster to ultimately yield more profitable opportunities? 

Finding the best conversion opportunities is the key to success - to do that well you need access to the right property data - commercial and residential.

You can find out more about our commercial conversion package here.

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