Office to Residential PD Conversion, Borough

The Challenge

A developer acquired a 1980s three-storey office building on Great Suffolk Street in Borough, south of Southwark Street. The building benefited from a Prior Approval under Class O permitted development rights, allowing conversion from office (B1) to residential (C3) use without a full planning application. The scheme proposed 10 apartments — a mix of studios, one-beds, and two-beds. The challenge lay in the building's structure: the concrete frame and floor-to-ceiling heights were adequate, but the mechanical, electrical, and plumbing systems required complete replacement, and the fenestration needed upgrading to meet residential acoustic and thermal standards given the building's proximity to busy Southwark Street. Additionally, some lenders were cautious about permitted development schemes in Borough due to questions about long-term desirability of converted offices versus purpose-built residential.

Our Solution

We arranged a £1.4 million facility at 58% LTC with a lender experienced in PD conversion schemes across central London. The relatively conservative LTC reflected the lender's prudent approach to PD schemes, but the rate was competitive at 0.72% per month. We strengthened the application by providing detailed comparable evidence from similar PD conversions on nearby Lavington Street and Union Street, demonstrating strong demand for well-specified converted apartments in the Borough area. The funding was structured with an initial drawdown for acquisition of the long leasehold interest, followed by staged construction drawdowns. We also arranged a separate £350,000 mezzanine facility to reduce the developer's equity requirement, bringing the combined LTC to 72%.

The Outcome

The conversion completed in 11 months. The developer invested heavily in specification — engineered oak flooring, integrated kitchen appliances, floor-to-ceiling secondary glazing for acoustic insulation, and a communal rooftop terrace with views towards the Shard. The premium specification paid off: the 10 units achieved an average price of £310,000 for studios, £380,000 for one-beds, and £485,000 for two-beds, with total GDV of £3.1 million. Eight units sold within 6 weeks of marketing launch, with the remaining two selling at asking price within 3 months. The developer netted £440,000 after repaying both the senior and mezzanine facilities, and the project demonstrated that well-executed PD conversions in premium locations can compete effectively with new-build on price per square foot.