Brendon O'Connor faced a problem when he set out to buy his first home. Despite viewing 200 properties he simply couldn't find anything he really liked.
Then someone told him about a scruffy suite of offices in Clerkenwell that had gone on the market at £400,000 but with planning permission for conversion into an open-plan home. Brendon grabbed his chance and allowed himself a budget of £60,000 to do the conversion work. In the end, after doing much of it himself (while holding down a full-time job), his glamorous two-bedroom home cost £100,000 to create - but it has still paid off handsomely.
Despite all the financial stress and hard work, not only is his home a show-stopper, it is also worth about £930,000 - even in these hard times.
Now the Government hopes to relax planning regulations to make it easier for people to change offices, warehouses and "light industrial" premises to homes.
Brendon, 43, head of communications for jewellers Simon Harrison, had been living in a rented flat in Whitechapel. He wanted to be able to walk to work in Covent Garden and began searching within a two-mile radius of his office. "Seeing so many properties gave me a benchmark. It was obvious that Clerkenwell was significantly undervalued compared to the surrounding areas," he says.
'This is a brilliant area to live - vibrant but not too noisy. You can walk everywhere, I don't need to own a car'
Then an agent told him about the floor of offices for sale. He saw it in 2005 and, impressed by the 1,400sq ft of space, agreed to buy it, beginning work within days of taking ownership.
One reason costs spiralled was that Brendon couldn't resist upgrading the specification as he went along. "It wasn't a development, it was my home, and labour costs were really expensive," he says. The end result is a slick, modern apartment with some well-thought out design twists - the bed in the guest room, for example, flips up to the wall so the space can become a study/dressing room when unoccupied.
"This is a brilliant area to live in - very vibrant but not too noisy," says Brendon. "You can walk everywhere; I don't need a car - it's brilliant." Brendon circumvented planning problems by buying a site with planning consent already in place. Experts agree that taking a punt on a commercial property without consent already in place is a gamble - and even lighter regulations will not include structural works or conversions of pubs, shops, or hotels.
The UK planning system is a capricious beast, with different councils operating their own systems. Jonathan Manns, a senior planning surveyor with Knight Frank, agrees that the system can be hit and miss. "It depends how much risk you are willing to take. There is a clear upside arising from the uplift in value but the system is a minefield." If a property you are interested in doesn't have consent, you can get advice from your local planners.
Manns also suggests talking to a planning consultant, because, he says: "The planning system is adversarial, and a consultant knows how and when to push a plan a bit harder." If that sounds too risky - and you may struggle to find a mortgage unless a property already has planning permission - then Laurence Glynne, founder of West End estate agents LDG, warns you will have to pay a premium of at least 10 per cent. Despite this he believes there is still room to make some serious money. "If you have got the stamina then the opportunity is there," he says.
Currently on the market is the Covent Garden Coin Op, a laundrette on the two lower floors of a pretty period building on Betterton Street. For £800,000 you can buy the building with permission to convert it into a two-bedroom apartment with a courtyard (LDG.co.uk). The agents think conversion would cost about £400,000 and that the property would then be worth in the region of £1.45 million.
Another central London commercial building in Berners Mews, Fitzrovia, is currently used as offices but with plenty of original features and permission for a four-storey home. It is on the market for £2.5 million (LDG.co.uk) and would cost £100,000 plus to convert. It could be worth an estimated £2.75 million - but with a smaller margin, negotiations over sale price would be in order.
As well as scouring estate agents, Glynne advises checking trade publications like the Estates Gazette, and trawling the streets for empty buildings.
A key place to find commercial buildings ripe for conversion is auctions. Robin Howeson, an associate at Savills Auctions, says buyers should look for a property close to a Tube or train station, with scope to expand the original building. "One bidder bought a garage for £70,000 in Shepherd's Bush and turned it into a contemporary two-bedroom house which is now worth £400,000," he says.
"Look for property with roof space or possible opportunities to build up or out." Outside central London, a Victorian shop with two upper storeys on Grove Lane in up-and-coming Denmark Hill is on the market for £640,000. The property has planning consent to be converted into three flats which agents Acorn (acorn.ltd.uk) believe would together be worth £880,000. Converting it into a single house would need consent, though the finished property could potentially be worth £850,000.
Making it easier
The Government wants to make it easier to gain "change-of-use" permission to turn commercial property into homes. New rules will apply to offices - even blocks - some warehouses, workshops and storage buildings, with the aim of creating 70,000 new homes over 10 years.
A national consultation on relaxing planning rules closed on June 11, 2011. A spokesman said any new rules would be published "pretty soon", though would require new legislation. This could come early next year.
Even if the rules are changed, people may still need permission if they want to change or extend the outside of the building or if it is listed. But the possible change in rules could mean now is a good time to eye up an office block.
Pictures by Adrian Lourie