A top insurer is warning that there are major risks with the current appetite for converting commercial buildings into residential homes.
Analysis by Zurich UK shows a 20% year-on-year increase in commercial to residential applications after companies cut down on office space.
Since 2015, more than 89,500 homes have been developed from former commercial buildings under planning rules introduced to cut down on red tape Academics at London School of Economics (LSE) caution that over half of UK homes are at risk of overheating and likely to increase.
Following the relaxation of planning legislation in March to allow commercial buildings to be converted into new homes more easily – a policy of the past Conservative government – Zurich UK warns that conversions need to be done properly and a surge in poorly converted offices could create homes unfit for future climate conditions.
While 2024’s summer may have felt brief and fleeting, temperatures across Europe have reached sweltering sustained temperatures – continuing a pattern of higher maximum temperatures and longer warm spells in recent years.
Government planning data shows applications to convert commercial offices into residential units in England increased from 1,025 in 2022 to 1,235 in 2023 – a jump of 20%.1 This follows a previous 20% applications boost between 2020 and 2021, as developers snapped up pandemic-vacated workplaces.
Residential conversion applications include those from use class E – commercial, business and services – and includes offices, banks, restaurants and shops.
Zurich says that adding to the UK’s housing stock is a priority for the government. However, while converting unused and under-utilised building into housing stock has merits there are concerns that poorly designed and built conversions, which lack appropriate ventilation, cooling systems and external shading, could create swathes of homes which are vulnerable to more frequent heatwaves and hotter UK summers.
With many commercial buildings located in heavily built-up concrete areas they are also more exposed to the ‘urban heat island’ effect, where temperatures are hotter and flash floods from heavy downpours are a higher risk.
As well as the risks of overheating, Zurich sees a high volume of escape-of-water claims from poorly designed office-to-residential conversions, with one of the most frequent causes being the failure of substandard plumbing systems or in buildings simply not designed to accommodate dozens of kitchens and bathrooms. Additional research shows that these conversions affect vulnerable people disproportionately and can exacerbate existing inequalities, impacting occupiers’ wellbeing and quality of life.
Paul Redington, Zurich’s Major Loss Property Claims Manager, says: “As legislation continues to evolve, enabling under-utilised properties to be repurposed to help ease the housing shortage, the number of office-to-residential conversions has continued to rise.
“Increasing the UK’s housing stock is vital and understandably high on the government’s agenda, however it’s important that conversions are well-designed and well-built – for example, including cooling features to avoid creating homes that overheat and suffer other issues, such as the escape of water.
“As more intense and frequent heatwaves become a dominant feature of the UK’s summertime, developers need to ensure ventilation and shading are considered to create homes that are safe and resilient to our changing climate.”
Tony Mulhall, Senior Specialist in Planning & Development at RICS, adds: “The continuing pre-occupation in the commercial property sector with what are frequently referred to as ‘stranded assets’ – properties that do not meet future regulatory efficiency standards or market expectations – is increasing pressure to find alternative uses for these properties.
“Government policies and standards on embodied carbon make building adaptation the main route to re-use, and, in a country experiencing a severe housing shortage and increasing residential property values, conversion to residential is an obvious consideration which the Government has facilitated through various regulatory relaxations.
“It is important to enable the re-use of buildings no longer needed for their original purpose to a use for which there is a fundamental need, but the buildings need to be fundamentally suitable for such conversions.
“Additionally, the residential standards applied need to ensure we don’t create problems in the future, especially with increasing temperatures predicted. Natural light and ventilation are just two of the key standards that need to be met but there is one often neglected – direct access to external space such as a balcony.
“Direct outdoor space will become increasingly important as people grow older and less mobile however for developers relying on ‘Permitted Development Rights’ to convert, this would draw them back into the planning permission regime – something they would probably wish to avoid.”
