This week Simon Morris explores how the conversion of more offices into residential property may impact UK property investment funds portfolio.
Simon Morris, the Residential Property Specialist
Simon Morris is a London-based property investment specialist. In this capacity, Simon Morris acts in an advisory role to UK property investment funds. Simon’s expert advice on markets such as commercial and residential properties, allows said funds to ensure they reap high returns on their property portfolios.
In Simon’s experience, when it comes to property investment, it is wise to follow the trail of demand. If one sector of the property market is growing, that suggests that there is a greater demand. A greater demand often leads to fatter profit margins. Such is the case with residential property right now.
Office Property Becomes Residential, Particularly in London, South East
The trajectory of the current UK residential property market has been highlighted due to figures from the latest commercial property market survey from Royal Institution of Chartered Surveyors (RICS). The survey concluded that in London and the Southeast of England, more offices than ever are being converted into residential properties.
The survey found that overall, the amount of transactions of commercial properties being sold with Permitted Development Rights (PDR) has risen. These rights allow for commercial properties to be converted into residential properties. Whilst across the UK, a net balance 49% of survey respondents suggested that this activity was having a ‘moderate’ effect on commercial sector activity, this figure rose to 50% for London and 60% in the South.
“Balance of Power Now Shifting Back to Landlords.”
According to Property Wire, RICS chief economist, Simon Rubinsohn, commented on the figures. Rubinsohn said: “The latest results provide clear evidence that the economic recovery is broadening out across the country with rising employment increasing the demand for space in all sectors of the market. As a result, the balance of power is now shifting back to landlords with rent expectations turning increasingly positive.”
He went on to say: “Meanwhile, the pressure in the office sector is being exacerbated particularly in popular locations by the gradual conversion of some secondary space into residential. While making a much needed contribution to the substantial shortfall of homes, there are understandable concerns that this could be creating a related problem for businesses looking expand their footprint as economic confidence grows.”
Simon Morris Comments
Is this indicative of a trend? In Simon Morris’ opinion, it’s too early to tell. Commercial property is still performing well, so we’ll have to wait and see. However, as the economic recovery continues to gather momentum, this could be a trend worth capitalising on at a future date.