Permitted development, that’s the thing. When people ask me what I’m interested in at the moment, that’s what I tell them, and let’s make the best of it because we’re not sure how long it’s going to last.
Since 2013, we’ve been able to convert unlettable offices into desirable and profitable residential premises without struggling through the planning system which, many people will no doubt agree, is enough to give the calmest of people a massive headache.
Take Watford where we were left with three floors of offices above a shop when the occupier decided to vacate, keeping only the ground-floor unit. Let’s be honest, Watford isn’t known as a town where there’s strong demand for office space so we grabbed the opportunity to create nine flats, which were all let before the work was completed. It has to be said that the building is in a pretty, pedestrianised street in the town centre. I mean,
it doesn’t work everywhere. But this was a sensible win/win for everyone – us, the local authority and the happy new tenants.
Here’s another. We own, for reasons that I can’t now recall, a hideous 1960s monstrosity in Hanworth, Middlesex which housed offices above retail adjacent to some residential units that were sold off some time ago. Again, the offices were unlettable. Soon there will be 10 flats. Good job.
When the government first allowed this kind of permitted development it was intended to last for three years and it’s unclear whether it will continue beyond 2016. There might be a fear of creating an over-supply of residential and a shortage of office space. There’s no doubt in my mind that the increase in office rents in some parts of London is partly down to the number of office to residential conversions that have been carried out.
Sometimes it’s worth battling with the planners. Take Shoreditch, where we own a terrace of listed buildings in what wasn’t always but is, these days, one of the trendiest streets in fashionable east London. It’s taken a lot of time and patience but we’ve just started work on the construction of nine new-build flats on a car park site next to a railway line. Talk about jumping through hoops – but we got there.
Sometimes you just can’t make sense of it. This one still mystifies me. When we wanted to add an extra floor to a building we own in Charlotte Street, central London, we were turned down initially but won on appeal. We then applied to do the same just around the corner in Charlotte Place and were turned down both on the initial application and on appeal. The buildings are almost identical, the area is the same but the planning inspectors were different.
What’s all this about development, you may be wondering, because I am at heart an investor, a compulsive buyer of buildings and a rent collector. Well, I had to adapt in the tricky years and selling was essential. Just the other week we sold two buildings in Wigmore Street, West End, for £11.3m and a large property in Kingsland High Street, Dalston, with planning permission for a residential tower above retail, for £18.5m. Selling more than £1bn of stock has certainly sorted out the debt situation.
So the disposal programme is pretty much finished and it’s all worked out rather nicely. We’re not planning to buy but we’ll probably spend around £15m in the next couple of years on both permitted development and new-build schemes, all out of cash flow. We’re looking at working buildings that have been neglected and we’ve taken back some of the work we temporarily outsourced – rent reviews, some legal work and management – so the business is more efficient.
I’m now in the fortunate position of being able to do yoga four mornings a week before going to the office and turn more of my attention to the roof of St Paul’s Cathedral, which is in a worrying state of disrepair. It breaks my heart to see buckets catching drips in that magnificent space so, through my charitable foundation, I’ve committed to help raise £1.25m to repair the roof. It’s going to be a challenge but it’ll be worth it.
David Pearl is chairman and chief executive of Structadene