The conversion of industrial buildings into living spaces first caught on in the 1970s as councils realised that this was a cost-effective way of reviving old building stock. By the 1990s warehouse developments were bringing regeneration to urban areas throughout the UK, with Manchester, Liverpool, London’s East End and other major towns all benefiting from this renewed interest in pared-down modern living. However, as property prices continue to rise and large developers strength­en their stranglehold over most urban areas, individuals looking to convert one-off buildings are having to think more creatively about finding affordable opportunities.

What Type of Building Should I Buy?

“Whilst old barns and run-down mills can offer immediate inspiration, choosing less obvious structures may increase your profit margin,” says Derek Latham, author of Creative Re-Use of Buildings. Water storage tanks, power stations and old fire stations all have great potential but Derek advocates avoiding garages: “Decontaminating the land will eat into profits, whilst their location next to busy roads will decrease the resale value.”

Identifying current trends of rationalisation can highlight unexpected opportunities. “For example”, says Derek, “old railway buildings, village hospitals and telephone exchanges are increasingly available, whilst disused military installations can offer stunning views in otherwise unattainable locations.”

Bill Maynard of Urban Splash, who have undertaken several high-profile conversion projects in the UK, points out that tower block conversions have great potential: “Often structurally sound but run down by anti-social behaviour, under better management such blocks can offer affordable accommodation which combines convenient central locations with stunning views and a good community feel.”

Where to look

Bill Maynard maintains that increased mainstream interest in the urban housing market has priced out the smaller investor. He recommends looking for opportunities in fringe areas to fulfil the need for affordable accommodation and cites areas such as Bolton and Altrincham – both proposed sites of future Urban Splash developments – as the ideal example of “city living rather than city centre living.” As long as the area is within 15 minutes by taxi of the city centre, he argues, then it can provide the city lifestyle. Furthermore, established communities like these boast their own amenities for immediate convenience — making them the ideal prospect for new homeowners.

Bill states that “opportunity will spread to the suburbs” and advises individuals to follow the market in terms of new transport links and office developments. If a major domestic development is being planned in the area then amenities are likely to spring up to meet the new demands. By paying attention to activities within the local planning office you can take advantage of these changes whilst property prices are still low.

Derek Latham, meanwhile, advises looking in areas where other people wouldn’t: “A characterful property will have a certain caché and draw people into areas they wouldn’t otherwise consider.” Even areas with a bad reputation will be acceptable, according to Derek, as long as the property has a defensible space which enables it to be valued differently from its surroundings.

Derek also suggests asking the local authority what their regeneration plans are. Urban Regeneration companies are increasingly being offered the opportunity to buy up derelict properties on Compulsory Purchase Orders. As long as you avoid the centre of their develop­ments such companies are likely to be co-operative and may even be able to offer you some advice.

Local auction houses, local papers and estate agents can be an excellent way to source your project whilst Plotfinder.net is an invaluable source of help, featuring hundreds of properties available for conversion on their daily-updated lists. The Society for the Protection of Ancient Buildings (SPAB) publishes a quarterly list of old buildings for sale or lease that need repair work, renovation or conversion to a new use. These range from castles to cottages and churches to industrial buildings at prices from £10,000 to £10 million. The list is only available to SPAB members, in order to protect the build­ings from unscrupulous development by large companies. For more details see spab.org.uk or call 020 7456 0916.

Derelict buildings are often in the hands of trustees who haven’t got round to selling. If the building is listed or of historical value you can persuade them into selling by arguing that the local authority may soon order them to repair the building, at significant cost. You can even go directly to the local authority explaining that that you are willing to repair the building but that the owner refuses to sell — this may spur them into serving a repairs notice.

Potential Problems

Older buildings may offer the most character but are likely to be less stable, and often have limited headroom and uneven walls and floors – this is a particular hazard when inserting intermediate floor levels as supporting beams must be slotted in with complete accuracy. Conservation Officers may also place strict limitations on the work done and materials used if the building is deemed to be of historical significance.

Sometimes conversions create practical problems such as inadequate parking or access, the overlooking of neighbours and limited gardens which, even if accepted by the planners, may reduce the desirability of the resulting home.

Other hazards to consider include dangerous materials such as asbestos, common in buildings built or refurbished between 1950 and 1980. Provided the asbestos material is intact and not in a position where it can be easily damaged, it does not pose a health risk but work with asbestos based materials must be carried out by a HSE-licensed contractor. For more information see hse.gov.uk/asbestos.

Who will lend and at what stage?

Most self-build lenders, such as the Norwich and Peterborough Building Society (0845 300 2522), and Advanced Flexible Self-Build Mortgages (01259 726650) will offer finance to buy the building, followed by stage payments for construction. Before releasing any funds, lenders will want to see a copy of the Outline Planning Permission, and this will need to be followed up by Detailed Planning Permission before any stage payments can be made. Funding will also be subject to building regulation approval, listed building consent where appropriate, a structural engineers report and detailed drawings, specifications and costings. Roy Winston of Credit and Mercantile (01342 837111), who will fund 100% of development costs, promises that they will give an immediate ‘in principle’ assessment of the project, followed by a review of its commercial viability.

How Much to Pay

Property values take account of development potential but remember that any commercial developer would expect to retain a 20% profit after costs, and you should too. If you are developing for profit take into account the wage value of the work that you will carry out yourself. In areas with a high current value it may take up to 30 years to make a profit in real terms — this is considerably reduced if you opt for a property with less obvious potential.

It is much harder for builders to price conversion work than new builds, so it’s a good idea to collect a number of quotes and ask for a full tender to avoid hidden extras. If you opt for a complete architect service – including design, planning applications, building regulations, tenders and contract man­agement – Julian Owen, Chair of the ASBA architects network, suggests that a percentage payment of the total project’s cost is most appropriate. If you feel that this is too unpredictable in a conversion project where it is difficult to estimate the full extent of the work required beforehand, a good compromise is an hourly rate, with ranges of time for each stage clearly agreed.

Buying

Before handing over any money get a full structural survey, to include the building’s suitability for residential conversion. This will give you an idea of any potential problems and likely costs involved. If there are any common parts shared with other owners, such as the roof or communal access, check out responsibility, relevant legal matters and sharing of costs. You will also need to spend a lot of time with your solicitor, making sure that you own the full title and access rights before commencing work. Check with the agent and on the deeds to see if the site is already ser­viced.

Joint developments with like minded people can be an excel­lent way to achieve profits from larger buildings otherwise out of your budget. As with all joint financial ventures, make sure all aspects of the development and resale are agreed and written down beforehand.

Case Study

The Old Maynards’ Winegum factory in Hove was originally advertised by a local agent as having plan­ning for residential and office use, split horizontally across the building. Architect John Kerr saw greater potential for the building however, and, together with developers Q Property Ltd, transformed the disused factory into separate stunning units that would fulfill the current desire for live/work facilities as well as meet planning requirements for retaining the building’s employment use.

“The building seemed to divide naturally into seven vertical bays so it made sense to follow these lines”, says John. By inserting a lightweight modern trans­parent roof they created a fourth floor to the building which was flooded with light from the north and south.

The red brickwork exterior remained largely untouched – although the original metal windows were replaced by similar double glazed versions to meet building regulations – and the building retains its sturdy industrial character. Internally, however, contemporary fittings contrast with retained areas of brick­work to create an exciting tension between old and new.

“The existing building was structurally in good order,” says John, but some huge cast columns had to be removed for the party walls and dry lined acoustic panels inserted. Whilst each of the units were offered either as a shell or fully fitted, John notes that for the most part buyers were keen to get the finished article, complete with smart home technology.

John comments that local residents welcomed the development, having had any doubts regarding noise levels alleviated by an open day at the beginning of the project. The consequent rise in local property prices has further increased good feeling and the team now hope to embark on a similar project in an adjacent building.

H&R Planning Expert Ken Dijksman’s Advice

Getting planning permission is always something of a lottery, but the odds of success are getting better for conversion opportunities in city centres, towns and villages. The Government is encouraging more houses on brown-field sites and this includes the residential re-use of existing buildings. It is only in primary shopping areas that residential uses may be resisted; most local councils are now very keen to see more people living in the heart of their town centres, so the pressure is for more units in a conversion rather than less. A few years ago the conver-sion of former industrial buildings was restricted by rigid parking standards and minimum garden area require-ments, but now a much more pragmatic approach is being taken. This is in contrast to conversion opportunities in rural areas, which are being squeezed by an emphasis on commercial alternatives like offices or holiday lets. There are a number of reasons for converting a building rather than redeveloping the site, but most of them result from planning controls — not sound economics. If a building is listed or in a Conservation Area permission is unlikely to be granted for replacement, so a conversion is the only option. Be aware that there will be tight controls on changes to the design, increases in floor space and the extent of any demolition. Unless you have very deep pockets always buy subject to planning permission, using an Option Agreement or a Conditional Contract.

Before any planning permission is granted a full schedule of works may need to be submitted, so make sure you see this before agreeing the property price. All new doors, windows, roof tiles etc. will need to be agreed by the planners and could be expensive, not to mention any necessary underpinning or roof structure repairs. The overall design will be expected to reflect the importance of the building, not what would make it a nice place to live. Even with these provisos urban buildings can often make wonderful conversion opportunities but the costs are likely to be higher than for new build.

Design Tips

  • Either introduce traditional features in keeping with the building and its original purpose or work in a complete contrast, making any changes to the building obvious. Attempting to forge a middle ground using traditional features not in keeping with the original building will completely fail.
  • Decide what you would want – for example cosy nooks or huge south facing windows – if you were building from scratch, and develop a brief before you walk around the building. Then decide how you can get the building to meet those needs with the least possible intervention — if it is impossible, walk away and find something more suitable.
  • Make a feature of the original structure by exposing beams and brickwork. Not only will this save dramatically on costs, it will also give the house a sense of personality.
  • Retain the original qualities of the building, such as vast open spaces. Successful building conversions are those in which the original use remains self-evident. Plan carefully how to place the staircase to least change the structure. People will pay a premium for clarity of design.
  • Consider the aftercare requirements of your design. Will the materials you have chosen require frequent maintenance (this is often the case with traditional and natural materials) and will you, or a potential buyer, be prepared to offer this?
  • Try to keep interesting features such as external staircases, plaques, door ironmongery, cast iron ventilators, bell and bell frames, machinery and traditional stone floor surfaces. Remove unsympathetic later additions to reveal original features and try to keep major changes as reversible as possible.

VAT

The creation of a new dwelling, including conver­sion, is largely free of VAT. For details contact HM Customs and Excise: hmce.gov.uk

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