Office conversions need to stop


By - Wednesday 12th August, 2015

The extension of Permitted Development Rights (PDR) to offices has transformed Croydon at a speed not seen since the ’60s. But now – as then – it’s getting out of control


In the 2012/2013 financial year, Central Croydon was sporting office vacancy rates worse than central Detroit. A quite astounding 52% of available space was empty; literally millions of square feet of unused space, including thirty-five entirely vacant buildings.

Two years on that number has dropped to less than half a million. Not because of a sudden influx of new companies, but because almost all of that space has either become flats, or soon will do, in a large part as a result of the extension of permitted development rights.

No one could call this turnaround anything less than spectacular, but outside the property press it’s slipped by with little remark, and therein lies the danger. Because ostensibly dull sounding issues – changes so seemingly irrelevant to most people, so legalistic, so dry on the ear that they garner very little public attention – can pass us by too fast for us to do anything about them, even if we want to. The government’s May 2013 extension of PDR is, in every way, the perfect example.

Origins 

A fairly straightforward piece of legislation, it allowed developers across the country, for the first time, to convert office buildings to residential use without going through the normal planning process. Provided that they meet a very basic set of standards on application to the local authority, they are automatically granted an approval to convert the office into a dwelling (nearly always flats or, more likely, many flats). Councils like Croydon’s have more limited means to object, and receive none of the usual contributions they would receive to local infrastructure, transport and amenities: an amount usually in the £100,000s for larger developments. Costs for the developer are therefore a good deal lower than even a normal conversion.

The idea was simple, and on the surface entirely reasonable: make it easier and cheaper to convert empty, run-down offices, and developers would rush in to turn them into badly needed housing; bright and airy and in reach of the common man. A very free-market solution to a housing crisis.

Growing empires

In other places, its effects have often failed to really live up to this hype. In areas with lower prices and little stock to convert, the results were always likely to be minimal. In areas of central and inner London not exempt from the law, where residential values are astronomical but office stock was already low, its effects have been greater. They’ve accelerated the construction of homes far out of reach of almost anyone, squeezed office space tighter and given city planners a headache.

But in Croydon – now held up as the poster child for the success of this policy by the property industry – you have to admit that, in sheer quantity of housing at least, it’s worked exactly as intended. Already by late 2014 Croydon accounted for 1/7th of all such developments in the whole of the UK. Take the area around the high street and the flyover in Croydon, right on the edge of Old Town. It was once filled with empty offices; now there is almost no usable office space left. Surrey House, Canius House, Green Dragon House; all of these very substantial buildings are all being converted, right now, to flats by one of the town’s largest conversion players: Inspired Asset Management. Such changes are not often visible to the casual observer from the street – a lick of paint here, some new windows there – but the change is huge and will result in potentially thousands of extra residents living on this single street by the process’s end.

The great ’60s plan for Croydon left it a dead, no-go zone

Up in the ‘new town’ by East Croydon a similar revolution is under way driven by AA Homes and Housing. Exchange Court, 5 Sydenham Road (once an office for NatWest) and Cygnet House are all well on the way to being turned into flats and the company is actively acquiring more. Criterion Capital, the last of the three major conversion players forming micro-regional empires (focused on the Wellesley Road) are developing several projects. Most notable among them, the country’s largest PDR project: BT’s old Delta Point building (aka Gotham General in The Dark Knight Rises), which is soon to become more than 400 build-to-rent flats on its own.

Few would really be sorry to see these mostly decrepit buildings put to better use. Some of them had been entirely vacant for a long time, precisely because they don’t meet modern office standards. They were never that great to begin with (architecturally or in terms of comfort) and stood no realistic chance of being let for years, possibly ever. It’s very hard not to argue that some kind of housing is much better than nothing, even if their real affordability remains very debatable, an enormous topic in itself and worth its own treatment. The whole problem of the great 1960s plan for Croydon was, as I have written before, that it had almost no residential at the core. It emptied out at night so completely that it became a dead, no-go zone – a vertical office park, not a lively neighbourhood throughout the day. Surely anything that helps us to get away from that is to be welcomed?

Uncertain quality, empty coffers

A major problem with any system that bypasses the normal planning process is that… it bypasses the normal planning process.

First there is the money. Developers would normally pay contributions to local infrastructure when they build something new, and the council loses out of money that could be used to support the local infrastructure needed for an increase in population.

Then there is quality. We already know that many of the new developments fail to meet space standards for new flats, both inside and outside the town centre. Even in conversions that the council is now having to use to temporarily house people. Many of these dwellings are small, often well below the 37 square metres recommended space standard. A little-noted back-and-forth debate is currently being carried out between Inspired Asset Management and Croydon Council about this very subject. The council believes that they’re simply too small for a good quality of life, while Inspired maintains that its innovative design provides lot of real usable space at a price that average earning young people (couples at least) can purchase at.

Something troubling has begun that spells genuine disaster for the future of Croydon

Whoever is right about the specifics of any one development, it’s difficult not to be very concerned about the lack of oversight either way. The point of planning permission is to make sure that standards are high, that sudden changes to an area can be phased to allow for infrastructure to catch up (new schools, new doctors surgeries and other amenities) and the developments fit aesthetically into their context. Even if individual developers plan for some of this in their own interest, it’s far from a guarantee that they will look for the same standards as the council. After all, if we could rely on developers to be altruistic enough to build quality in a sustainable, well planned way, we wouldn’t have planning permission at all. The council’s desire to opt out altogether – it will try for the third time on 10th September this year – is entirely understandable.

But something even more troubling has begun to happen. It’s not only the old, outdated and largely surplus space that’s going, it’s basically everything that isn’t a flat already (tenanted or not) or where premium office rents are already being paid by tenants. And that spells genuine disaster for the future of the town.

Insatiable, unstoppable appetites 

From the beginning, no one should be under any illusions that PDR has just meant empty offices being converted. From the start, many of these buildings did have tenants, drawn mostly by affordable prices. In the highest profile example, Croydon’s very own apprentice, Bianca Miller, was turfed out of Cygnet House at short notice to make way for its conversion. Danielle Lowe covered a similar problem, with more businesses involved, in the north of the borough just last year.

How much these evictions, which are awful for the businesses involved, are a price worth paying for the town as a whole is highly debatable. Often these buildings are let on a short term basis with the proviso that, at any time, their owners could redevelop. The cost of very low, flexible rents is uncertainty. But it is clear that things are now moving into a completely new gear.

It isn’t just the old clapped-out buildings being converted. Perfectly serviceable, recently built or refurbished buildings are being gobbled up for residential development. Inspired has substantially expanded their empire with the purchase of Impact House, a building extensively refurbished to provide high quality office accommodation in 2010. AA Homes has purchased both Metro Point – a modern, sleek steel-and-glass office building built only in 2004 and occupied by the Home Office’s IT department – and the recently refurbished Premier House, whose bottom two floors were provided as offices a few years ago as a deliberately mixed development.

There is a very real chance that we will end up repeating the mistake of the ’60s

Most troubling of all, the very same AA Homes has now applied for automatic approval to convert Lunar and Apollo Houses to residential: the HQ of the UK Border Agency, two entirely occupied structures where well over a thousand people work. Thankfully AA Homes doesn’t (yet) own the buildings, but they could easily sell the planning permission to whomever does buy them now that they’re on the market. Those buyers wouldn’t need further planning permission, as AA Homes have got their application in just in time (if the council succeeds in its exemption bid).

It goes without saying that the effects would be disastrous if such a conversion went ahead: either vast numbers of jobs lost, or the possibility that the government will have to make a bid for much of the new office spacing coming forward at Ruskin Square – not the kind of office tenant that, to be frank, the landlords will really want right next to its promised glitzy bars and shops. But this might not even be the worst effect of these moves.

There is a very real chance that we will end up repeating the mistake of the ’60s – in reverse.

1956 all over again

It’s true that Croydon might never again be a beating corporate back office heart. This fate may have already been sealed by the vast, slow and steady departure of companies and government departments in the ’00s. Even the one million square feet of offices planned for Ruskin Square don’t come close to making up for the lost space if it’s the last one standing. But this worrying trend means two more consequences, which lead us towards a deeply ironic turn of fate for Croydon: the creation of a vast high-rise dormitory, a town that is all residential and no business.

Lots of small retail businesses, restaurants and chains flourish with the daytime trade from nearby office workers. Just look at what the density of workers does for central London; whole areas teaming with activity, especially eateries. Even our coming Westfield will be hugely boosted by having a ready supply of tens of thousands of office workers on its doorstep looking for lunch, dry cleaning services and last-minute gifts for their loved ones. If those people aren’t there, the streets will be dead and more shops and high street services will close. If Ruskin Square is the only office development left (and let’s remember that none of those offices has been built yet), the only on-street activity will be in its own public spaces and along the most direct path between it and Westfield. Suddenly it goes from being lonely and deserted at night, to an eerie ghost town by day.

The dreams of Croydon Tech City are as good as dead in this scenario

Even where some space does exist for new business in a few places, none of it will be affordable. There’s no way that Ruskin Square – quoting today at £35 sqft, pre-let – will be in the reach of the small startup companies that are increasingly calling Croydon home. One vital ingredient in the recipe for a startup area is that it is affordable; that some of the office space isn’t great, that it’s relatively plentiful and it’s cheap. Realistically, the dreams of Croydon Tech City are as good as dead in this scenario. You can’t have a tech city without somewhere for the people to work in tech.

If it does all play out like this, the 2013 Permitted Development Rights extension will have ended up having the same effect as the 1956 Croydon Corporation Act: a town dead for half the day where the only businesses outside of a shopping centre are corporates and government departments.

What now?

I for one sincerely hope that none of this comes to pass. If the council has its way on 10th September, then everything will be slowed-down. If the corporates come back in big enough numbers, people will start building new office space again, acting as a safety valve to prices and increasing availability. If flat prices stop escalating, the whole conversion business will lose its lustre.

But it’s a lot of ‘if’s. The government is still yet to announce if it will extend PDR to 2020 (it was supposed to end next year) and it could block Croydon’s exemption attempt at any time (there’s localism for you!). If you want to start fighting for a really vibrant Croydon now – one with all kinds of life throughout the day – I’d get your thinking cap on and gear up for action. This isn’t over yet.

James Naylor

James Naylor

James grew up in Coulsdon. After a brief spell in Somerset he returned to central Croydon as a useful London base. Since then however, his enthusiasm for Croydon has slowly grown into obsession – leading him to set up Croydon Tours and eventually the Croydon Citizen. James is particularly interested in the power of local media to foster new ways of thinking about communities and how to empower them. He is most interested in putting Croydon in a wider context within London, the economy and across time. During the week, he works for an advertising technology company hailing from Silicon Valley. When he’s not working on Croydon-related projects, he enjoys desperately nerdy but hugely enjoyable boardgames. Views personal, not representative of editorial policy.

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  • moguloilman

    Housing (and it now appears by inference office space) provision is a subject fraught with politics as much as economics and social policy.

    I have spreadsheets the size of bedsheets trying to figure out what the shape of Croydon housing is and what it ‘should’ or could be. My overwhelming (admittedly still qualitative) impression is the politics plays a much bigger role than is admitted, often hiding behind double-speak terms like ‘affordable’ and ‘decent’.

    The incoming Labour Council imposed increased social housing requirements on those developments over which it has control. One can argue whether this is right or wrong, but it changes the character of these developments.

    PDR office conversions are outside their control so do not have to meet this social housing requirement. Concerns raised on ‘quality’ have to be judged in this context.

    • James Naylor

      Thank you for your comments Robert! I agree that’s another very important factor that needs to be considered here. The council have certain political aims for town centre resi (social housing) that goes beyond mere workability. Though n exemption was applied for before Labour took office. My sense is that’s there’s cross party Support anyway for the other reasons I focus on here. Certainly planning officers are very concerned.

      I would love to see those spreadsheets at some point. A contentious issue but some more data driven analysis on this issue would be great!

      • moguloilman

        Hello James,
        Thanks. Will keep trying to find something sensible from the data. Did I read somewhere that the Council will be updating the Croydon Local Plan soon, do you know?

        • Jamesny

          Cool! Unfortunately, I don’t know. The last review they did was a couple of years ago though.

        • James Naylor

          Cool! Unfortunately, I don’t know. The last review they did was a couple of years ago though.

  • http://matthewsyard.com Saif Bonar

    A great article James. We have sadly repeated the same mistakes in Croydon as they did in Silicon Roundabout 5 years ago. Except, its more explainable in Liverpool Street, than in Croydon – where we aren’t short of non-office land to develop.

    I touched onthe subject in this piece 4 years ago..
    http://www.businesscomputingworld.co.uk/tech-city-is-a-great-idea-shame-about-the-location/

    Positioning Croydon as a tech city become more difficult without the cheap, low-grade office space startups crave. A grade offices are great for banks and government offices, but cash-strapped start-ups would have loved to fill the floor plates at Green Dragon House and Surrey house.

    On the flipside, from my perspective, the conversions are great for MY and have helped us attract more repeat business from the increasing density of residential blocks nearby.

    • James Naylor

      Cheers Saif! I remember this piece and thought it exactly what we needed at the time.

      Exactly as you say, this surplus space wasn’t capitlaised on then, largely because the government is always looking for the easiest wins: building on something existing that can’t fail becuase there’s already momentum behind it (even if it isn’t the best long term bet). On one level entirety rational and sensible of course but lacking in vision. I suspect the moment for us to out do Shoresditch on space quantity has passed now because of this revolution. But if we save some of it, we still have a chance to nurture the scale ups.

      I think *some* of this is good for CTC for the same reasons it’s food for MY – it brought more life into the town forever but it depresses me that we’re now going mad for it rather than just rebalancing.

  • Reena

    I work in acoustics. We visited the Surrey House flats looking at buying one and it seems they have passed the tests for Part E of the building regulations, which means a basic standard of sound insulation. The lack of council involvement was noticed in the sense that the bedrooms are way too close to the flyover and surrounded by condenser units right by the window. For the price they were asking, this was very badly thought.

    However, my OH fell in love with the flats. They were really nice (inside).

    So don’t be so negative, James! I’m more concerned about how the city center is going to be able to cope with all those potential new residents. I’m happy not queuing outside a restaurant like Londoners happily do, thank you very much.

    • James Naylor

      Indeed – this is what I was referring to in the middle section. If you suddenly increase population you can’t plan for this sort of thing. Its still going to be a while that East Croydon will be upgraded ektn a new junction and extra platforms for instance. Our very two way commute is way easier on infrastructure and services too.Eg take those restaurants. With lots of residents and office workers they’ll be more in the town centr to service lunch crowd, making more o them more viable in the evebing for you!

      • Reena

        I guess that’s where the food only Boxpark comes into place, but I still don’t know how we’re going to cope between the demolition of the Whitgift and the opening of the Westfield. The Whitgift is such a basic part of town!

  • THE BEST

    I have read today in Lunar house about Croydon council planning to closing down Apollo House and Metro. There will be a bigger disaster for all people’s who works in those building including me . This people’s will loose the jobs and house, because like me I have just started working in home office and Metro after three years been unemployed. Croydon council is planning to closing down all this offices for building hotels or flats, well Croydon will be with a lot of unemployed people’s again. We will back to sign on ..again.. the Government is a joke !

    • James Naylor

      Thanks for the comment. Actually, as per the article the council are against this policy – this was something forcd on Croydon by central government. Lunar and Apollo House are safe but there is nothing thay can be done at Metro Point. AA Homes and Housing got their planting application in on time to get an automatic grant. It’s really crap.