West End loses 3m sq ft of offices to homes, report says

The conversion of West End offices to residential space has led to a "tightening of office supply in the core West End and is helping to fuel occupier competition for new Grade A space", the company's study 'The 'lost' offices of London's West End' (4-Pages / 177 KB PDF) said.

H2SO analysed the conversion of offices to residential space throughout London's West End between 2001 and 2009 using data from the Westminster council planning department.

The study found that 4.2m sq ft of office space was converted to either residential, restaurant, leisure or other alternative uses. Residential conversions accounted for 3m sq ft of the 4.2m total square feet of 'lost' office space.

High property values in key central London locations, particularly Mayfair and St James’s, has driven the conversion of former office buildings into homes, according to the study. 

Homes can command twice the price that office buildings can, the study showed. "The best residential conversions are reflecting investment values of more than £3,000 per sq ft when the corresponding value for the building as offices might be around half of this."

Period buildings have been particularly impacted, according to the study, because they lend themselves to residential conversion, and more than half of the conversions have involved small office facilities, often on single floors.

“Today, the proliferation of residential accommodation is accelerating significantly again as the value of high-end residential outstrips cooling commercial values," said Paul Smith of H2SO.  "Many period office buildings that started life as private homes are struggling to find commercial occupiers. This presents the opportunity for residential conversion, and the planners have generally looked favourably on such proposals."

The tightening of office supply in the core West End has fuelled competition for new high end, Grade A office space and has corresponded with the development of new office centres in locations such as Paddington, Euston Road, Kings Cross and along the south bank of the Thames, where occupiers with large-scale requirements can more easily find the size of space they need, the study found.

The trend looks set to continue, according to the study, which found that around 1.8m sq ft of space has planning permission for conversion from offices to residential use. However, increased office development in new locations has balanced the loss of supply in the West End.

Locations such as Savile Row, St George Street, Bruton Street and New Bond Street have come online to meet the needs of contemporary occupiers and offer more efficient, more appropriate facilities for 21st century businesses, the study said.

“While on the face of it this apparent loss of stock might appear to be bad news for the West End office market, it should actually be welcomed as it repositions a whole raft of buildings back to their appropriate use, brings new life to them and also funnels demand to the office buildings that work best for contemporary occupiers," said Smith. “The trend puts the West End in better shape to meet the needs of those who either want to do business or live in the location.”