UK - West End office would have underperformed last year had it not been for residential conversions pulling up overall property performance to levels last seen in 2008, according to Savills.
In a presentation in London this week, the property group said residential conversion values in the West End had pushed up office and suggested that residential and retail performance would continue to influence office prices in the capital.
Between 2001 and 2009, developers converted 3m square feet of Westminster office to residential. Otherwise, office would likely have underperformed, said head of London residential development Dominic Grace.
Savills director of planning Nick de Lotbiniere told IP Real Estate the performance gains had been made primarily in Westminster, which is beginning to see a richer and better mix of uses, and in areas such as Covent Garden.
He said: "In areas such as Mayfair, we're talking about buildings that were built for residential, but were converted after the [Second World] War because offices in the City had been bombed."
Grace said residential's performance last year supported a clause in the London Plan - the mayor's planning framework for the capital - that allows developers to convert underused office into housing.
The Corporation of London, which administers the City, and London Councils, a body representing 33 local authorities in the capital, have strenuously opposed the decision to relax the conversion rules.
In the City itself, said de Lotbiniere, there was a compelling reason in the district's status as a European financial centre not to encourage conversion to residential, although the Corporation of London allows some residential in peripheral zones.
Asked whether converting office to residential could pull up property performance in other UK cities, he said: "The idea came from ministers driving on ring roads across the UK and seeing vacant floor space. It's different in other cities because there has been less conversion of existing stock.
"But plenty of 1960s and 1970s office buildings are partly redundant, and there's little demand for them, so it would make sense for local authorities to relax the planning rules to allow conversion."
No comments yet