Surge in commercial-to-residential conversions

• 63 per cent increase in commercial to residential property change of use applications across England between 2021 and 2023
• Conversion approvals increased 60 per cent over the period
• London is the center of the commercial to residential conversion revolution
• Underused commercial, business and service premises such as offices and retail outlets are increasingly being converted for residential use

New research¹ from Direct Line landlord insurance reveals a surge in applications to convert commercial, business and service premises² such as offices and retail outlets for residential³ use.

Analysis of local authority data reveals a staggering 63 per cent increase in the number of commercial to residential change of use applications made in the last two years, between 2021 and 2023, with approvals increasing 60 per cent over the period. The number of change of use applications in 2024 is on track to exceed last year’s figure by a further 20 per cent, indicating a steady growth of opportunity for landlords looking to convert empty commercial buildings into sustainable rental properties.

While there is an undersupply of housing in England⁴, the rise in remote working and the retail sector's continued transition to online has left many commercial properties under utilised or vacant. This has created new opportunities for landlords with suitable commercial, business and service premises who can apply to convert suitable locations to help meet the nation’s soaring demand for residential property. For landlords, converting these spaces into residential units can help to offer opportunities for greater revenue, long-term stability, and new streams of income.

London has seen the highest rate of growth in commercial to residential change of use applications between 2021 and 2023, with seven London Boroughs featuring in the top ten. Haringey took the top spot, with a 100 per cent increase in applications in the two years, while Enfield, Merton, Croydon, Ealing, Lewisham and Hackney also found their place in the list.  

The data also revealed that Somerset (90 per cent increase) Wakefield (70 per cent), Bristol (68 per cent), Sheffield (58 per cent), and Milton Keynes (57 per cent), have seen particularly high levels of change of use application approvals, with office space, retail outlets, and warehouses being repurposed to meet the growing residential demand.

Table one: The top 10 areas with the highest increase in approved change of use applications – between 2021-23

Source: Direct Line business insurance 2024

Jonny McHugh, Head of Landlord at Direct Line business insurance commented: “The property market is constantly evolving and as demand for residential property continues to soar, it has increased the attractiveness of converting commercial units for domestic use. By converting underused commercial properties into residential units, landlords can help maintain their revenue streams and future proof their investments.”

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Notes to Editors: 

1.      Freedom of Information request, made to all Local Authorities across England in July/August 2024, to find the number of change of use applications from ‘Class E - Commercial, Business and Service’ to a ‘Class C3(a) – Dwellinghouse’. 242 local authorities replied with usable responses.

2.      'Class E' is a broad category of commercial, business and service uses.  It was introduced by the Business and Planning Act 2020.

Class E effectively amalgamates the former Class A1 (retail), Class A2 (financial and professional services), A3 (restaurants/cafes), B1 (offices) along with health/medical uses, creches, nurseries (all formerly D1 uses) and indoor sports/recreation (formerly D2 use). Permission is not required to change between any of the uses within Class E.

3.      ‘Class C3(a) – Dwellinghouse’, C3(a) covers use by a single person or a family (a couple whether married or not, a person related to one another with members of the family of one of the couple to be treated as members of the family of the other), an employer and certain domestic employees (such as an au pair, nanny, nurse, governess, servant, chauffeur, gardener, secretary and personal assistant), a carer and the person receiving the care and a foster parent and foster child

4.      House of Commons Library

5.      Department for Levelling Up, Housing and Communities, 2023

For further information please contact: 

Email: directlinegroupmedia@fleishman.com

Direct Line Group 

Unni Henry 

PR Manager

Email: unni.henry@directlinegroup.co.uk 

About Direct Line business insurance

Launched in 2007 Direct Line business insurance now has over half a million customer policies, providing a flexible range of insurance products for the landlord, van and small business sectors.

Direct Line business insurance policies are underwritten by U K Insurance Limited, Registered office: The Wharf, Neville Street, Leeds LS1 4AZ. Registered in England and Wales No 1179980. U K Insurance Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Direct Line business insurance and U K Insurance limited are both part of Direct Line Insurance Group plc.

Customers can find out more about Direct Line business insurance products or get a quote by calling 0345 301 4827 or visiting https://www.directlineforbusiness.co.uk