Considerations when converting commercial properties

Business Insights

By Ritchie Clapson CEng MIStructE, propertyCEO

I have enjoyed working on many development projects, both large and small over the past four decades. For example, the company I ran was the peer review engineer for the London 2012 Olympic Stadium. Back then this was the largest construction project in Europe. However, I’ve also been involved in a large number of conversion projects – tiny in comparison.

When we launched propertyCEO, our property development training business, we asked ourselves the seemingly simple question: what would be the best project for someone doing their first development?

As with many simple questions the answer has to take account of a number of considerations.

    1. What should they build?

Residential property carries a premium so seems the obvious choice. However, smart developers start small, so the ideal starter project needs to have enough scale to produce a meaningful profit, but not so big that you’re kept awake at night. Let’s say that ‘small’ is between 5 and 20 units which would produce a profit of circa £100-300k.

    2. Risk

There are several issues here. New build is great once you’re out of the ground, but conversions allow you to dodge some potentially nasty bullets such as foundation problems, hidden utility pipes etc. You’re more restricted above ground, but conversions in my opinion carry less risk and are usually quicker to complete.

There is also the issue of planning, and here the smart option must be making use of permitted development rights (PDRs). While elevational changes will need full planning, changing the use class using PDRs is a massive plus in terms of reducing timescales and the risk of refusal. The other advantage of converting is that you’re making use of an infrastructure that’s already there.

    3. Conversions of commercial buildings

So, converting a small commercial building under permitted development sounds ideal. But which type of commercial building is the best to convert? Office conversions have long been fashionable, as have retail conversions. The reason is obvious; offices and shops are usually located where people want to live, and it’s easy to see how they can be divided into flats. The windows are generally in the right position, so the challenge is working out the best internal layouts.

The issue is competition. Lots of developers can see the opportunity, as can the vendors’ estate agents. This means that the prices for offices and shops are at a premium. So, what type of buildings lie in (or close to) residential areas, can easily be converted, look unattractive, and don’t carry a hefty price tag?

    4. Light industrial buildings

It’s quite a wish list! There was only one property type that fitted the brief: light industrial buildings. These can be found in residential streets up and down the country and are often little more than a concrete slab with four walls and a tin roof. I’ve converted several over the years, and the reaction has always been one of surprise that an ugly box can be turned into something attractive.

The last 12 months have seen considerable changes to the permitted development landscape, starting with reclassifying many commercial buildings, including light industrial, into the new ‘super’ use class E. Then, in August 2021, the right to convert any class E building (up to 1,500m2) into residential using the PDR class ‘MA’ was introduced. This represents a HUGE opportunity for small-scale developers, allowing a significant number of different buildings to be converted, projects that are usually far too small for the larger developers.

The other attraction of light industrial buildings is that there are some neat tricks to developing them, which most developers are unaware of. This prompted us to publish a book on the subject (the snappily-titled ‘Industrial to Residential Conversions’ available on Amazon), which we’ve recently updated to reflect the latest planning changes. While the main focus is on the secrets of converting these buildings, the book is also a guide for anyone interested in doing small-scale development projects.

Creating value from light industrial properties which are often ignored is a good way to reduce competition and to make a bigger profit. Good luck with your first or next project.


Ritchie Clapson CEng MIStructE is a veteran property developer of almost 40 years and co-founder of propertyCEO, a nationwide property development and training company that helps people create a successful property development business in their spare time. It makes use of students’ existing life skills while teaching them the property, business, and mindset knowledge they need to undertake small scale developments successfully.