New Government rules yesterday allowing unused office and industrial sites to be redeveloped without planning permission into housing could, in our view, allow Watkin Jones to regenerate its city centre sites into build-torent (BTR) or student accommodation more quickly, and with greater certainty. This should further enhance the residential for rent developer and manager’s low-risk, capital-light offer to institutional property investors and support the Government’s aim of reviving urban centres.
Planning permission no longer needed for rebuilding vacant sites. The new rules follow PM Boris Johnson’s 30 June 2020 pledge to “build, build, build”. These include new ‘permitted development rights’ to allow the demolition and rebuilding of ‘vacant and redundant’ office and light industrial buildings as homes without planning consent. The rules, which come into force at the end of August will only apply to buildings constructed prior to 1990 that have been “entirely vacant” for six months.
Tackling urban blight. The new rules are aimed at reviving blighted town centres and include a change to the ‘use class’ system to allow high street premises – such as shops, restaurants and offices – to interchange without specific permission, through the creation of a new broad “commercial, business and service” use class as well as easier addition of heights on homes. A more fundamental reform of planning is expected later in July.
Quicker development and lower risk for institutions. We believe this could significantly reduce WJ’s current development cycle of c. three years for BTR and student accommodation, of which planning takes some 12 months on average. We could envisage the group actively targeting vacant sites, which are likely to attract low land costs. WJ already stated in its 19 May HY resultsthat the fall-out from Covid-19 and its strong balance sheet will allow it to “take advantage of economic opportunities that may arise”. As well as potentially shortening the planning phase, the changes should add further transparency to investors forward-funding its schemes.
Unique defensive growth model. The group develops student accommodation and now BTR, forward-funded by leading institutional investors, thus reducing financial risk and capital requirements. It also has a growing accommodation management division, with strong revenue visibility and providing valuable synergies for student and BTR divisions, as well as a housebuilding business with tightly deployed capital. See 9 June 2020 initiation note, Build-to-rent ‘comes of age’.