All developers face the issue of how different councils interpret the national permitted development (PD) policy.

Darius Ziatabari

All developers face the issue of how different councils interpret the national permitted development (PD) policy.

In London, many boroughs, such as Westminster and Camden, hold an expansive Article 4 exemption policy from PD, meaning office-to-residential conversions must go through planning, prove the unviability of the office use and then make large community infrastructure levy and section 106 contribution payments.

In towns such as Milton Keynes and Bracknell, Article 4 exemption areas are being expanded. The number of applications for PD conversions has decreased by 20% each year, since it was announced back in 2013. This means developers are scrambling for fewer opportunities. However, what is most concerning is that across the board, sales prices are experiencing downward pressure.

Developers are paying too much money for PD sites, sometimes as much as 50% of the gross development value figure, considering these risks. We know a handful of PD developers who have miscalculated site appraisals and are now under pressure. Vendors are now fully aware of an office building’s PD potential, while many recent PD developers are unaware that conversion costs can often spiral.

Roof space

Agents often talk about adding space on the roof, but the majority of councils will not allow extra roof space until PD has been put into effect and tenants have moved in. We cannot put scaffolding through someone’s ceiling to develop the roof. The schemes must therefore be viable with just the PD element.

Some councils, such as the Thames Valley Basin in Surrey and Berkshire, require a suitable alternative natural greenspace (SANG) and strategic access management and monitoring contribution for every apartment constructed under PD.

Apex Airspace Southwark

Firms like Apex Airspace are taking to the rooves for development space

This can cost £2,000 per unit and some towns have now sold all their SANG land. Bracknell has allowed private developers to create SANG land and sell this to developers for 10 times the council contribution value. This could mean the typical PD development of 40 units would now require a compulsory, private payment of £350,000, instead of the council estimate of £35,000.

Developers should be strict about buying offices at realistic, safe values or not get involved with PD at all. There are too many risks to have no breathing space. Councils should improve on giving absolute clarity to their policies of roof-space additions as well as SANG land capabilities. Ideally, all councils should adopt a national policy with the same rules and regulations.

Darius Ziatabari is co-founder of Equinox Living