With a 63% surge in commercial-to-residential conversion applications between 2021 and 2023, landlords are seizing the opportunity to transform vacant commercial spaces into high-demand housing, driven by changing market dynamics and policy support.
Reshaping the property landscape
New research by Direct Line landlord insurance reveals a significant shift in the UK property market, as landlords increasingly pivot to converting commercial spaces—such as offices and retail units—into residential properties.
Between 2021 and 2023, the number of change-of-use applications soared by 63%, with approvals rising by 60% over the same period. This trend is set to accelerate, with 2024 applications on track to grow by an additional 20%.
A solution to two crises
The rise in remote working and the continued shift to online retailing have left many commercial properties vacant or underused. Simultaneously, the UK faces an acute housing shortage. For landlords, this creates a unique opportunity to repurpose these spaces into sustainable housing while maintaining or enhancing revenue streams.
Converting commercial premises into residential units offers:
- Higher yields compared to struggling retail and office rents;
- Long-term stability in the face of growing residential demand;
- Portfolio diversification, capitalising on a new wave of tenant needs.
London leads, but the regions catch up
London is at the forefront of this trend, with seven boroughs featuring in the top 10 areas for conversion application growth. Haringey leads the pack with a 100% increase, followed by boroughs like Enfield (90%), Merton (89%), and Hackney (73%).
Beyond the capital, regional areas are also seeing a surge in conversions:
- Somerset recorded a 90% increase, fuelled by a shift in office demand;
- Wakefield (70%) and Bristol (68%) are transforming warehouses and retail units to meet local residential needs.
Top 10 areas for commercial-to-residential conversions
| Region | % Increase in Approved Applications |
| London Borough of Haringey | 100% |
| Somerset | 90% |
| London Borough of Enfield | 90% |
| London Borough of Merton | 89% |
| London Borough of Croydon | 85% |
| London Borough of Ealing | 78% |
| London Borough of Lewisham | 75% |
| London Borough of Hackney | 73% |
| Wakefield | 70% |
| Bristol | 68% |
Future-proofing investments
Jonny McHugh, Head of Landlord at Direct Line business insurance, comments:
“The evolving property market and rising demand for residential housing make commercial- to-residential conversions an attractive strategy. By repurposing underutilised commercial units, landlords can safeguard their revenue streams and adapt to shifting market needs.”
With office spaces, retail units, and warehouses ripe for redevelopment, landlords across the UK are capitalising on this growing trend, meeting housing demand while ensuring sustainable income and investment growth.