What Impact Will Relaxed Planning Regulations Have on Commercial Property Investment?
There’s growing speculation that the UK government is going to make it easier to switch between commercial property uses or convert commercial spaces into residential ones. If true, this could bring significant changes to the property market, particularly those who are alert to the opportunity presented by a more relaxed planning process. But what might these changes mean for the sector? And how can bridging finance help investors seize these opportunities?
Simpler planning regulations could provide fresh impetus to the commercial property market, freeing up under-utilised buildings. Reducing the barriers to changing a property’s use could unlock the potential of under-utilised assets, especially in cities, while helping property owners diversify their income streams.
For investors, this added flexibility also mitigates risk. Instead of being tied to a specific, potentially outdated use, properties can be repurposed to meet current demand. Additionally, these changes could open the door for new entrants to the market, particularly those who may have been discouraged by the existing complexities of planning approvals.
Increased opportunities for residential conversions
One of the most significant potential impacts is the facilitation of commercial-to-residential conversions. According to recent data from the Ministry of Housing, Communities and Local Government, the number of commercial-to-residential conversions under Permitted Development Rights rose by 25% in the last two years. If new regulations further streamline these processes, this trend is likely to accelerate, addressing housing shortages while offering investors lucrative opportunities.
For instance, vacant high-street retail units could be transformed into much-needed housing, or outdated office spaces repurposed as modern apartments. These projects not only offer solid returns but also contribute to the regeneration of struggling urban areas.
Impact on commercial property values
While the potential for greater flexibility is very positive it could also lead to some volatility in the market. Properties in struggling sectors, such as retail, might see their values stabilise or even rise as their conversion potential grow, but conversely, prime commercial assets may face downward pressure if investors shift focus to properties with greater versatility and opportunity for conversion.
Savills’ latest figures from their October 2024 report, reveal that commercial property yields are already stabilising, with prime office yields in regional cities holding steady at 5.5% in Q3 2024. Easier planning regulations could further close the gap between traditional and alternative asset classes, making the latter increasingly attractive to opportunistic investors.
How bridging finance can help investors capitalise on these changes
Relaxed planning regulations could create a wave of investment opportunities, and bridging finance is perfectly positioned to help investors take advantage. By offering fast and flexible funding, bridging loans allow investors to secure properties under tight deadlines, fund conversions or repurposing projects, and adapt their strategies to align with new market demands—all without the delays associated with traditional financing.
Relaxed planning regulations have the potential to reshape the UK commercial property market, creating a more flexible and responsive environment for investors. For those ready to embrace the change, this could mean exciting new opportunities to diversify their portfolios and capitalise on underutilised assets.
At London Credit, we specialise in providing the fast, flexible funding solutions that investors need to act decisively in today’s market.
Constantinos Savvides, Head of Underwriting at London Credit
