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Commercial to Residential Finance

Finance for converting redundant offices, retail units, and other commercial buildings into residential homes, typically using Class MA permitted development rights or full planning permission.

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Rates

7.0% – 11.0%

per annum

LTGDV

Up to 70%

LTC

Up to 85%

Timeline

6-18 months

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Finance structure

PDR Senior Development Loan

Rate
7.0% - 10.0%
LTC
Up to 85%

Best for: Class MA prior-approved office-to-residential schemes in strong urban locations with clear comparable sales

Full Planning Senior Loan

Rate
8.0% - 11.0%
LTC
Up to 80%

Best for: Larger town-centre or mixed-use schemes requiring full planning consent and ground-floor commercial retention

Mezzanine

Rate
12% - 18%
LTC
Up to 90%

Best for: Developers seeking to maximise leverage on high-GDV schemes while limiting equity contribution

Key considerations

Exit strategies

Sale of completed residential units on the open market
Retain and refinance as BTL or PRS portfolio with long-term investment mortgage

Eligibility

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Market context

Commercial to residential conversion has become one of the most significant delivery mechanisms for new homes in England, contributing an estimated 60,000–70,000 homes annually. The expanded Class MA permitted development rights introduced in August 2021 — removing the previous 1,500m² floor area cap — dramatically increased the pipeline of eligible buildings. Town-centre vacancy rates above 15% in many UK secondary retail locations continue to generate a strong supply of suitable buildings, and lender appetite for well-located urban conversion schemes remains robust heading into 2026. Average yields on completed schemes in regional cities range from 4.5% to 6.5% for standard market-sale units.

Frequently asked questions

What buildings qualify for Class MA permitted development?
Class MA covers buildings in Use Class E (commercial, business and service — formerly A1, A2, A3, B1) that have been vacant for a continuous period of at least 3 months. The conversion must be to Use Class C3 residential. There is no floor area cap, but the prior approval must consider factors including flooding, contamination, natural light, transport and the impact on the local area. Buildings in conservation areas and listed buildings are excluded.
How does the prior approval process work and how long does it take?
You submit a prior approval application to the local planning authority covering the prescribed matters (typically flood risk, contamination, transport and natural light). The authority has 8 weeks to make a decision. During this time they may request additional information. If no decision is issued within 8 weeks, prior approval is deemed to be granted. Most councils reach a decision within 6–8 weeks, making this significantly faster than the standard planning process.
Can I retain ground-floor commercial space in a conversion scheme?
Class MA strictly requires the entire building to be converted to residential use — it does not permit hybrid schemes retaining commercial ground-floor space. If you wish to retain commercial units, you will need full planning permission rather than relying on permitted development. Mixed-use schemes are viable and often attractive in town-centre locations, but require a more complex planning and finance approach.
What are the typical build costs for an office-to-residential conversion?
Build costs for commercial to residential conversions in the UK typically range from £900 to £1,800 per square metre depending on specification, location and the condition of the existing building. Open-plan office floors converted to apartments generally require new partitioning, bathrooms, kitchens, MEP services and external windows — costs vary significantly based on the building's existing condition and floor-to-ceiling heights.
Does the permitted development route affect my Section 106 liability?
Under Class MA, local authorities can only consider the prescribed prior approval matters — they cannot impose Section 106 affordable housing contributions or CIL through the prior approval process in the same way they can through a full planning application. However, some authorities have CIL charging schedules that apply to Class MA conversions. This is a significant financial advantage of the PDR route and should be modelled in your appraisal.

Related project types

Conversion Finance Mixed-Use Development Refurbishment Finance

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