Amidst dire imbalance of supply and demand, empty commercial buildings could provide solution to UK housing market woes
Simon Bath is a property expert and the creator of Moveable – he discusses the growing importance of converting empty spaces to homes to help ease rising prices
A severe imbalance between supply and demand has driven house prices to the highest levels in almost two decades. In stark contrast, the commercial real estate market has experienced a significant rise in empty office spaces following the pandemic. This trend is likely to continue given that British businesses are facing a severe energy crisis with firms experiencing around a 250% increase in bills – according to Cornwall Insight. With the government failing to deliver on their target of building 300,000 new homes a year, Simon Bath, property expert and CEO of property technology company, iPlace Global, the creators of Moveable, explains that we must look towards other alternatives to increase the number of homes available and ultimately, satisfy the record levels of demand currently weighing down the housing market.
More than 22,500 commercial units have been empty for at least six months in the capital, according to Centre of London. As work and lifestyle patterns change, and working from home becomes the new normal, office spaces have become less of a priority for occupiers as they reconsider their business requirements. The British Consortium (BRC) reveals that one in seven shops in Britain is empty, increasing the amount of wasted space across the nation – space that has the potential to be repurposed and used to alleviate the housing market’s rush in demand.
A study by real-estate consultancy, Lambert Smith Hampton (LSH) found that there has been a 20% reduction in the office space needed by businesses compared to before the pandemic. The same report found that just under half (43%) of employees were attending the office only two days a week, while almost a third (29%) said the most common rate of attendance was three days a week. Whilst building owners struggle to replace tenants to occupy commercial spaces, converting these spaces into residential purposes could provide a larger pool of interest from renters and/or buyers. In New York, an empty Wall Street Office is being revived as apartments – making room for 571 new residential spaces. In 2020 and 2021, office conversions created over 13,000 new apartments in the US, in an attempt to combat the nation’s housing shortage.
Currently in the UK, it is domestic developers who are coming to the forefront and helping to ease the lack of available stock. Research from Moveable has even revealed that 24% of millennials are looking to buy a home to develop, not to live in. Now,Rightmove has found that there has been a 24% jump in the number of prospective sellers bringing homes to the market, as estate agent appraisals reach the highest level since January. Of the same mind, commercial building owners also have the opportunity to not only generate another stream of income through development and buy-to-let; more importantly, they will be able to help prospective homeowners get on the property ladder by increasing levels of stock and reducing prices in the housing market.
“Commercial properties are seeing a sharp decline in terms of interest and requirement from business owners. Instead of wasting these spaces, they should be turned into housing to help ease the severe issues with supply and demand that we’re seeing currently.
“Significant steps have been made this year in an attempt to help first-time buyers with getting onto the property ladder, including the removal of affordability tests, longer mortgage plans and the Right to Buy scheme. However, these schemes still haven’t addressed one crucial factor of such an expensive market – the severe lack of stock.
“Because there are so few available homes, house prices are continuously increasing – making it near impossible for first-time buyers purchase a property. Transforming commercial properties to residential homes will essentially help to alleviate the current supply chain issues and make it more achievable for first-time buyers to get onto the ladder.”