5 Top tips on your next Commercial to Residential Conversion Project

December 2022

5 Top tips on your next Commercial to Residential Conversion Project


Over the next year commercial property opportunities will be in abundance with more supply than demand. The current financial climate and interest rate hikes will mean that high street bricks and mortar businesses will inevitably have to close, coupled with the fact the more transactions than ever are being done online, in particular with companies such as Amazon making it easier than ever to order pretty much anything you need at the touch of a button which will be at your doorstep the next day. The impact of coronavirus also played a huge role in the changing high street, businesses have been made accustomed to allowing their employees to work from home, meaning they are seriously considering continuing this model or adopting a hybrid model creating far less demand in purpose built offices.


1.      Finding the right area


Depending on the commercial unit you purchase, for example in the case of offices they are often on busy roads or in light industrial parks where there is significant traffic and noise, this is because they were built around the car as it was assumed that everyone would drive to work and back so not all commercial units can benefit from a residential conversion. Due diligence is required here to assess the liveability and demand for housing in that area. 


When assessing the area to invest, ensure you do thorough research (check online portals and local policies) to ensure it works for a commercial to residential conversion. You should also check the commercial stock for an oversupply/undersupply, speaking to local agents will help assess the stock levels and viability of a potential conversion.


2.      Finding Your deals


Use commercial agents and treat them well! Unlike residential property, Commercial agents don’t necessarily use just one singular portal to advertise their property, ensure you use the commercial specific portals such as EG Property link and register with all of the commercial agents mailing lists within your local area to ensure you don’t miss out on any deals. Commercial auctions are another great way of finding great deals. You can also get plenty of deals off-market by reviewing high streets that have empty shops/businesses and obtaining information on these businesses through companies house and create a letter campaign directly to the vendors (top tip is to look at secondary and tertiary parades).


Commercial property is cheaper if you look at is as the price per sq ft often 2/3 x compared with residential, therefore making areas such asLondon where prices are rocketing still an attractive investment. Therefore we see the opportunity for investors and developers who want to get involved in this space to seek out small shops with uppers and office blocks ready to be repurposed into residential use.


3.      Stamp Duty Land Tax (SDLT) & Legals


The rates of SDLT are also lower and there is no 3%surcharge. Also, non-residential rates apply to mixed use property so investor scan still acquire a building which has flats within it but where there is say are tail unit on the ground floor and the stamp duty will be charged on the lower non-residential rates.  The difference can be significant.  


For example, purchasing a building for £975,000 would incur aSDLT charge of over £70k in Residential but non/residential/mixed use will be under £30k saving a whopping £40k in taxes alone. Top tip – this is also applicable for mixed use properties.


Assessing the viability of commercial premises in order to repurpose for residential use requires a lot more due diligence. It is flooded with much small print that you need to be aware of such as any restrictive covenants, particularly on an office block where the neighbouring properties are also used as offices, these conditions may make it limited in its change of use. Also, additional charges and levies may be applicable from the local council. 


4.      Planning


There is currently more commercial property in the UK than is required hence the government brought various planning changes which allow you to re purpose into alternative uses without seeking full planning permission.The current Use Classes were last updated on 1 September 2020. For example, the old use classes (A1 – Shop, A2 – Financial & Professional, B1 – Business offices etc.) have all been reclassified into Class E. Use Class E conversion to Residential has become a lot easier with the introduction of these PermittedDevelopment Rights (PDR).

Class MA is change of use to go from Use Class E to Residential.Class MA is done through a “Prior Approval” process, which has an approval time limit for the local authorities of 56 days, it also has a checklist of items it is assessed against, allowing greater certainty of approval if you meet the set criteria. Read through these PDR changes and make yourself an expert on the changes, that way you have a much greater chance of success.


External changes are not permitted under PDR. Many office buildings date back to the 1960s when external cladding panels started to become the norm. If the building you’re looking at has panels get written assurance that they are safe. Check out the windows too; they may be in poor condition – possibly only single-glazed or with limited opening lights. Offices often rely on air conditioning, but if they’ve been removed, summer overheating is a serious risk, particularly in the south or west-facing flats.


5.      Funding your deals


Financing a project is the biggest hurdle to overcome from the outset. It can be very cumbersome and difficult to attain if you do not have the right experience and knowledge. Short Term Loans (STL) are often known as bridging loans. They are used to cover short term needs for finance and can be used for many different purposes, in particular when it comes to converting commercial buildings into residential use.


Whether you need to purchase a property at auction, or turnaround a project quickly through refurbishment finance, STLs can be helpful.They are available for up to two years, or for as little as one month, so they can be flexible to your needs. Speak to a specialist broker about your specific requirements.



Myself (Hardeep Toor, Head of Developments / Partner), Sanjay Kumar (Co-Founder & Partner) & Malkit Purewal (Co-Founder &Partner), have been at the forefront of using and implementing these planning changes in recent years, where most of our projects aim at repurposing redundant commercial buildings.  We provide clients with fully integrated end-to-end solutions, first acting as consultants and advisors, and then as designers and developers. Much of our focus supports converting unloved buildings into places people can call home in the private sector. We also educate budding property entrepreneurs of how to specifically use the planning changes and provide a much better use of the commercial oversupply.


Case Study


Description: This scheme involved the conversion of a former bank to 3apartments and the retention of a commercial frontage.


Purchase: £305,000


Duration: 20 weeks


Project Value: £135,000


Gross Development Value (GDV): £725,000



We bought a commercial property which used to be a popular and busyNationwide Building Society branch in the heart of a Buckinghamshire village.However following COVID and 3 lockdowns people in this village adapted well to online banking and reducing footfall. Nationwide made the decision to close the branch December 2020.


We completed the purchase in June 2021 through a bridging loan throughout brokers & partners CPC Finance and repurposed the building to benefit the rest of the High Street and the local community. Prior to Exchange of contractswe put planning for 1 x studio apartment on the second floor and 1 x twobedroom apartment on the first floor.


Originally the plan was to retain the entire ground floor as a commercial unit, however we identified an opportunity to convert this deep shop and retain the “Zone A” area as commercial use to achieve a higher valuation. Zoning is traditionally used for valuing retail property, specifically high street units where the retail frontage is particularly valuable. We then waited until after September 2021 to apply to convert the rear of the building into a 1 x one bedroom flat (due to it being in a conservation are) through the new Class MA rules, and retained the frontage as a commercial unit, which due to its rateable value, has no business rates payable which made it attractive for small businesses to occupy.


We managed the design, planning, legal and construction processes in a turnaround time of just twenty weeks to deliver these units up until refinancing as our exit strategy.


Every project we deliver is an opportunity for us to bring our unique thinking to solve problems, innovate and collaborate to provide the best living accommodation to our tenants. The result was three stunning dwellings with an exceptional finish and attention to detail and a modest commercial unit fit for a local business to occupy.