More offices converted into residential and it is starting to cause a shortage of commercial office space according to the latest RICS UK Commercial Market Survey, Q2 2014.
London and the South seeing more offices converted into residential properties while nationwide the availability of commercial property declines at fastest rate since the RICS survey began.
During Q2 2014, chartered surveyors saw a rise in the number of transactions of commercial properties being sold with Permitted Development Rights (PDR) to be converted into residential properties. UK-wide, a net balance of 49% of respondents said this activity was having a ‘moderate’ impact on commercial market activity, while almost one in five said it was having a ‘substantial’ impact.
The picture across the country, however, was more polarised, with respondents in the north being less affected by PDR transactions (net balance of 49% saying it was having ‘no effect’ on the market, compared with 32% of respondents in the south saying it was ‘substantial’).
Further compounding shortage issues, overall availability of commercial property declined at its fastest rate since the commercial market series began in 1998, with sharp declines in office and industrial space availability and the lack of supply to the commercial market is pushing investors away from prime location investments and towards ‘B’ grade investments.
Simon Rubinsohn, RICS Chief Economist, said: “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.”