A number of office blocks in Birmingham are up for sale with the potential for residential conversion, as agents in the city see growing opportunities to turn workplaces into homes.
JLL surveyor Maxwell Fellows told EG: “There are a number of properties in Birmingham city centre showing great conversion potential. As they don’t stack up in quality, we are seeing more of them come to the market.”
JLL is marketing Hortons Estate’s seven-storey, 26,653 sq ft Latham House for offers over £4m. It is let to four tenants, but it is being sold with the potential for residential conversion and the option to retain the site as offices.
Marketing documents for the building say: “Birmingham has the most acute shortage of housing of any tier-one regional city, and the residential market remains undersupplied despite record levels of delivery.
“With strong rental growth over the last three years, more than 70% of construction is now designed for build-to-rent, with a lack of schemes targeting private sale also stimulating capital value pricing growth. Birmingham is forecast to significantly outperform the UK average in house price and rental value growth.”
Other agents are trying to tap into the trend. “We have a lot of demand from developers looking for conversions,” said Will Jordan, head of Birmingham residential development at Knight Frank. “Developers like them as, depending on the stage of the building, build cost could be a lot less.
“Developers are looking for offices of less than 10,000 sq ft and all the way up to 60,000 sq ft. Value for residential is better than commercial office values [now] – that is the tipping point.”
Bond Wolfe is marketing York House on Great Charles Street for more than £3.95m. The 22,175 sq ft, five-storey office building is partially let and generates £187,522.50 pa. The development has an extant planning approval for conversion to residential, approved in 2014.
Already set to be converted to residential is the Grade II listed Taylor and Challen building. The warehouse and office building in the city’s Jewellery Quarter is in planning for conversion into 32 homes. The site is currently owned by a private individual and will be bought by a residential developer and converted to 32 one and two-bedroom flats, subject to planning approval.
Knight Frank’s Jordan said many office-to-resi conversions would prove of greater interest to open-market developers, rather than build-to-rent owner-operators. He added that there was only a “small pool of lenders that will lend on conversions”.
Charles Boyes, a partner in Gerald Eve’s residential capital markets team, said: “UK institutions are still wary of buying or funding office repurposing plays, just because of the historical context behind PDR.”
Boyes noted that office repurposing plays are usually smaller-scale PRS schemes, with up to 150 homes, targeting mid-market rents and without the full suite of amenities seen in traditional BTR.
He added: “There is still a place for these schemes in the market, it is just less likely the large institutional funds, unless for social impact, will be looking to buy that type of stock. It will be asset managers and propcos, usually with overseas equity looking to invest in that type of product.
“There is definitely space in the market for it if planning allows.”
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