Real estate relics turned into homes

Copyright: David Lawson 1996

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Patrick Hughes is fascinated by the faint dark streaks running down the wall of his home. 'Apparently this used to be a paint works and these were ingrained into the bricks,' he says.  But that was long ago. For years the stains were  hidden after the building was converted into offices. Now another transformation has stripped away the layers of history.

  Hughes is particularly fascinated because he is one of the country's foremost artists and has a professional interest in paints. Property investors would be more concerned with the glossy surroundings.  This imposing, monolithic hulk on the fringes of the City of London is part of a dark shadow looming over their heads. Thousands of similar buildings  produce a diminishing trickle of rents or are virtually unlettable. They form tidemarks around town centres  left by previous generations of developers. A growing number of  owners are beginning to accept that the economic waters will never lap that high again but are at a loss about how to what to do.

  Conversion to residential is one way out. A recent study by London Property Research (LPC) shows more than 2,000 schemes are planned or under way in Central London.  But many of these are questionable.   It seems doubtful, for instance, that anyone would choose to live with  the roaring traffic outside Hughes' window on London's Great Eastern Street. Nor would the gaggles of fading office blocks on anonymous city-fringe streets draw prices that would make conversion worthwhile.

 But a trend is emerging which could bring these relics back to life.  Hughes lives above his studio. That may seem unsurprising for this kind of bohemian activity, but a software developer and design consultant also live and  work in the building. Around the corner a barrister, a photographer and a publisher mix and match office and home in another conversion. Professional occupiers are beginning to appreciate the advantages of this kind of location.

 'If you add the incentive of being able to work in a building, it could tip the balance against unattractive addresses,' says Michael Richards of renovation consultants  Interior, which helped  produce a live/work option for Norfolk House, an 8,400 sq m (90,000 sq ft) block  in central Croydon as an exercise for Property Week earlier this year.

  He sees no physical reason why many of the ageing glass matchboxes clogging institutional portfolios should not take this path. 'Essentially, all you need is good natural light and ventilation,' he says.   Mixed use could also revive many buildings which are seen as too large for pure residential conversion. 'These are big shells which are more naturally suited as workplaces,' says Spencer Whitworth of surveyors Grimley.

 James Goff does not have to speculate about possibilities, however. He is too busy running around handling schemes already getting off the ground for  surveyors Stirling Ackroyd, which specialises  in developments like the one Hughes occupies.  But he remains frustrated by what he calls a 'lack of vision' among  landlords. And he has harsh words for planners who block developments.

  Just as big investors  baulked at pure residential conversions a couple of years ago, most remain sceptical about live/work. For instance, Geoff Carlton of Norwich Union, which owns the Croydon tower, did not dismiss the idea but worried about valuation problems and wanted to see other examples which proved the demand.

   Some conversion specialists are unsure about mixing commercial and residential uses. David Goldstone, chairman of Regalian, has developed separately in both markets and is a pioneer of conversions but remains worried about mixing the two. 'I think you will find that work space is included only because planners demand it. And I take the unfashionable view that people prefer to separate the the places they live and work.'

  Agents Cluttons are fulsome in praise of the floor of workspace being provided by Pathfinder Developments in a complex of warehouse conversions at tanners yard, Bermondsey, in London Docklands. This involves rooms of between 57sq m(616 sq ft) and 95 sq m(1023 sq ft) left as shells and accessible by spiral staircase from from apartments  below.

  But Nick De Candole of Pathfinder is less enthusiastic. 'We bought the scheme with the existing planning permission but would prefer not to have live/work,' he says. 'We can sell residential for £170/sq ft but estimate the workspace will fetch £120/sq ft.

  'We have no objection to work/live but would do it very differently. We would provide flexibility by putting in extra services like cabling for computers and allow buyers to choose their own division of space rather than a fixed ratio.'

 Goff faces this reaction every day. 'Landlords should realise that conversions have great economic advantages,' he says. On the one hand it gives enormous flexibility. Investors  can hold  onto schemes and gain a good income while the market is flat, but retain the option to convert back to offices one day. On the other, they could sell into a lively market, where developers can make a quick return by selling.

   Even if tenants could be found for conventional use, rents in an area like Shoreditch are only around £75/sq m (£7/sq ft) on short leases with break clauses every couple of years. A 5,500sq m (600 sq ft) B1 unit would sell for around £90,000. New Inn Square, a print works used partly for offices  and now being reconverted is finding buyers for live/work units at as much as  £250,000.

 Planning can be a problem. Areas like Hackney and Hammersmith are fighting a fierce battle to retain employment space and developers often give up at the first sign of trouble. 'They should be more determined,' says Goff. Much of the live/work activity comes from compromises worked out where planners realise buildings will otherwise stand empty, and accept a mix of use.

  Live/work is such a recent trend that it has no niche in the Use Classes Order, which should help give the flexibility owners and investors would appreciate. But Goff is incensed by planners' attempts to get around this by imposing ratios of, say, a 50:50 split between residential and commercial.

 'Small businesses expand and contract and should be allowed this flexibility rather than pinned down to strict rules,' he says.

  Planners should also realise there is also a wider social and economic benefit, adds Richards. The residential element brings people back to town centres and enlivens what are often dead commercial zones. The work activity opens doors for economic regeneration that  councils  desperately seek.  'It is particularly attractive to start-up and small firms, which have the biggest growth prospects,' he says. 'This kind of development  reduces risk because they don't have to put up the security of a home to pay for the workspace. And if their business goes bust they still have somewhere to live.'


One of the ironies  of the work/live debate is that this  is already a key activity in fringe areas around most of the UK's town centres. Pure statistics show only around 25 schemes on the cards in central London, according to Geoff Marsh of LPC. But the figure does not reflect demand, he adds.  'There is a huge informal use of buildings this way. People queue for  loft conversions and a lot of those will be used for work as well as living.'

  He sees the trend in planning applications as legitimising an existing use. More importantly,  it is moving out of the 'arty-crafty' sector which many conventional investors see as an unstable and complex market.   City planners have just given developers a free hand for producing 39 units for residential or work use out of  a 3,250 sq m (35,000 sq ft), Fifties office block in East Harding Street, EC4. Marsh expects more schemes like this to emerge and is briefing clients for a  similar one.

 London lacks this kind of small, up-market, mixed-use space, he says. 'Go to Bombay or Jakarta and you find firms and even embassies working out of hotel suites. The closest we come here is in serviced offices and illegal use of West End flats.'   He sees a need for live/work space for occupiers investors would normally kill to acquire - up-market, executive types who may not require conventional offices. They prefer space that can act as accommodation as well as handle business uses.