More office stock to become eligible for the use of permitted development rights
As Parliament introduces new permitted development rights this month, JLL has cited that upcoming change to an existing right may also provide more opportunities for developers
Permitted development rights introduced by the Government in 2013 allow the conversion of office buildings for residential use without the need for planning permission. When this legislation was introduced, 17 local authorities were granted exemptions from this right for designated parts of their boroughs. This exemption is due to expire on 30 May 2019. This would allow the use of this permitted development right in these designated exemption areas for the first time, unless the local authority extends the exemption through an Article 4 Direction.
An Article 4 Direction can be made by a local authority to restrict the use of permitted development rights. Local authorities will typically wait one year between making the direction and confirming it to avoid claims for compensation from landowners affected. The majority of these 17 local authorities have confirmed Article 4 Directions to essentially extend their exemption.
However, JLL highlighted that Ashford Borough Council, the London Borough of Newham, Sevenoaks District Council and Vale of White Horse Borough Council have yet to take action to extend this exemption, introducing new opportunities for developers to convert office floorspace in these areas. Specifically, office floorspace located in the Ashford Commercial Quarter, Harwell Oxford Enterprise Zone, Milton Park Enterprise Zone, Royal Docks Enterprise Zone and Sevenoaks District Council will become eligible for change of use under this permitted development right as of 31 May 2019.
JLL understands that some of these four local authorities are currently considering making Article 4 Directions to extend these exemptions. The local authorities do still have the ability to make Article 4 Directions that come into effect at the expiry date, but without a one-year notice period, they would put themselves at risk of claims for compensation from landowners affected by the Direction.
Ashley Collins, director in planning, development and heritage at JLL, said: “It is not clear why these local authorities have yet to act to extend these exemptions, only six years after applying for them. Could this have been an unintentional oversight? Alternatively, has this resulted from councils feeling renewed pressure from their housing delivery targets? “
According to results from 2018’s results from the Housing Delivery Test published by the Ministry of Housing, Communities and Local Government, Newham and Sevenoaks have underdelivered on their requirements (71% and 94% of housing requirement delivered over the past three years, respectively), although Ashford and Vale of White Horse have overdelivered (110% and 334% respectively).
According to JLL, this permitted development right only applies to office buildings in existence on 29th May 2013, so the stock of premises eligible has been finite. Over the years since the introduction of the legislation, developers have faced increasing difficulty finding properties appropriate for use of this right. However, the expiry of the exemption areas may introduce a large quantity of eligible office stock to the market.
James Finnis head of south east office agency at JLL, said “Permitted Development Rights enabling the conversion of offices to residential has generally been a force for good. It has delivered much needed housing and repurposed and regenerated redundant office space, much of which was beyond economic repair or refurbishment. This conversion to residential has brought in much needed regeneration often to town centres which were crying out for new residents and housing stock. Having residential lights on is much better for the economic wellbeing of an area than dark, empty office space. In some towns it has helped to rebalance the demand/supply equation which has enabled developers to deliver new, fresh office space which meets modern office occupiers’ requirements, again helping the economic regeneration of a location.”
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of over 91,000 as of March 31, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated.