First, the online shopping revolution led to a flight from the high street. Then came the pandemic. Established working patterns went out of the window, lower-grade commercial space has been offloaded en masse, and occupiers’ needs for high-quality space have shifted markedly. The result? A fundamental and lasting impact on our urban centres, to which even prime locations have not been immune. In the last few years, the way in which we work, shop and engage in leisure activities has been turned on its head. In the face of continued economic headwinds, these seismic shifts in the way we live present huge challenges for the real estate sector – but also significant opportunities for agile and innovative investors and developers to reimagine, revitalise and repurpose underutilised or distressed property. Let’s look at some key considerations, opportunities and constraints to keep in mind when thinking about repurposing.
Starting from scratch is so pre-pandemic
As the potential environmental implications and carbon impact of demolition and redevelopment have been thrust into the public consciousness – and the industry awaits the secretary of state’s decision in the Marks & Spencer inquiry with bated breath – the climate is right for refurbishment and repurposing.
While new buildings incorporating the latest technologies and techniques may be more energy-efficient during their operational life than existing ones, this needs to be weighed against the one-off embedded carbon generated during demolition and construction. Repurposing has strong ESG credentials and has also found favour with interested parties concerned with the preservation of heritage assets and historic buildings. The challenge for investors and developers is how best to retrofit and reduce operational emissions – a costly and often complex exercise – while meeting occupiers’ changing needs and generating appropriate returns.
Maximising flexibility
In England, planning legislation designates a series of “use classes”. Changes of use within a certain class are not deemed to be development and may be carried out without the need for planning permission (subject to any planning conditions or obligations which limit that flexibility). September 2020 saw the amalgamation of a number of previously distinct use classes into the single, much feted, use class E (commercial, business and service). The introduction of class E, encompassing a wide range of commercial uses including retail and offices, means that in many cases a property (or even part of it) may be used for a host of uses without the need for planning permission. From temporary meanwhile uses making use of a space awaiting the next stage in its life to longer-term mixed and flexible uses within a space, class E can, used imaginatively, be a real driver of repurposed and reimagined real estate.
Permitted development rights
Changes of use between use classes normally require an express planning permission to be obtained – but to provide further flexibility, permitted development rights deem consent for certain material changes of use without the need for planning permission (but usually require certain conditions to be met and may require a limited form of “prior approval”).
The introduction in 2013 of permitted development rights which temporarily allowed changes from office to residential without the need for planning permission was a rare instance in which the planning system found itself ahead of the curve. New permanent rights now exist allowing office uses and uses within class E to be changed to residential. Permitted development rights can, therefore, give considerable scope for repurposing relatively speedily without the need to engage with complex and time-consuming planning controls.
However, permitted development rights are not a silver bullet and must be used with care. Take, for example, the right to change from class E to residential. As well as being available only to changes of use meeting strict criteria, and the need for prior approval, the right has been curtailed further by “Article 4 Directions” made by planning authorities seeking to exempt areas within their boroughs from the right. In certain central London areas, for instance, authorities have made Article 4 Directions removing the right in order to protect the core commercial uses within the Central Activities Zone. Furthermore, although permitted development rights may help facilitate a change of use, any works or structures required to accommodate that change may themselves need planning permission.
In contrast to the unfettered flexibility brought about by changes within a use class, the permanent change of use pursuant to permitted development rights is a one way process. Once a change has been made, there is no automatic right to resume the previous use. Thought must be given, therefore, to the ease with which any consents required to resume the original use could be obtained, if necessary. In the case of a meanwhile use, a temporary planning permission might be a better bet. If longer-term fluidity is required, a truly flexible planning permission should be sought.
Ripe for a repurposing revolution
While the planning system provides a number of different mechanisms to achieve the repurposing of a building, consideration will need to be given to the suitability of the repurposed use in situ. Some uses coexist better than others – as the “agent of change” principle recognises – and there is little doubt that this will be reflected in the values the repurposed asset can achieve.
The conditions are ripe for a repurposing revolution. For all its weaknesses, the planning system provides the tools with which to set about the task. For those able to navigate successfully the regulatory framework and the practical challenges, significant opportunities exist to reimagine our urban centres.
Authored by David Wood.
