Completing commercial conversions with bridging finance

convert commercial property

The pandemic has resulted in many new, interesting trends taking shape across the property sector. One such example is the rise in the number investors seeking to convert commercial properties into residential apartments.

Why is this becoming a more common trend? What financial solutions may investors wish to consider if they are taking on an HMO conversion or property refurbishment?

Find out below…

Covid-19 and commercial consequence

The rise of Covid-19 had clear consequences for the commercial real estate market. Businesses left their offices. Retail premises were unable to open. The hospitality industry was forced to close entirely or resort to relying on takeaway. This meant commercial buildings were empty for many months, resulting in tenants cancelling or no longer renewing their contracts, as they remained uncertain about the upcoming year.

While the commercial real estate market has returned to strength in the past 12 months during the stamp duty land tax holiday and hospitality rate cut, vacant commercial properties remain common. Further, as the business rates holiday drew to a close in 2021, many landlords chose to sell their assets.

However, this has left the door open to investors who are looking to seize the opportunity in converting commercial properties into residential. In fact, a recent survey of property experts found that 87% are currently seeing a re-purposing of office space. This includes increased demand from overseas investors considering conversion projects.

Source: RICS Global Commercial Property Monitor.

It is likely that the commercial conversion trend will remain prominent in the months to come. After all, demand for houses and flats across the UK remains high, during a time where supply is limited. Taking unused commercial properties and turning them into residential lets and sales therefore makes good sense.

Covid-19 and commercial consequence

Converting commercial property into residential

Converting commercial property into residential assets can be a difficult and expensive task:

  • First comes the acquisition of the asset
  • Followed by ensuring the necessary planning permissions are in place
  • Carrying out the work

One thing that’s worth considering are properties or sites with Permitted Development Rights (PDR). PDRs were introduced by the Government to speed up planning applications. Over the past decade, changes to PDR rules have focused largely on the conversion of commercial to residential.

For example:

Class O sites are those that can readily be converted from offices into houses or flats. Class E covers high street premises being converted to residential.

You can find out more about PDRs on the website here.

Either way, investors must ensure they have the correct planning permission in place if they are considering a property renovation or conversion. This is often one of the major barriers to a conversion project, along with financing the work.

New to property conversions? Download our Guide to Conversion, refurbishment and renovation here.

newly converted property

Facing the finance together

When it comes to financing a large conversion project, finding a lender you can rely on for speed, security and transparency is key. Bridging finance is a short-term financial solution that could prove to be highly useful for property investors and developers looking to convert commercial property into residential assets.

For instance, we can provide loans to investors who wish to carry out:

1)      An HMO conversion: using commercial premises to create large residential dwellings

The short-term finance can ensure the investor has capital to complete the works, with the loan repaid either through the sale of the now-residential asset, or by finding longer-term finance.

Looking to learn more? Download our Guide to HMOs here, or discover our Buy-To-Let Mortgage for a fixed financial solution.

2)      Development exit loans are also popular in this area

An individual or group will often take out a development finance loan for any major renovation projects, such as a conversion. However, delays to the work or in selling the converted property can prevent them repaying the original loan. This is where development exit loans can help.

A short-term development exit loan from a bridging lender like MFS are available for borrowers who need to repay an existing development loan. This will give the developer more time to complete the project, sell the property, and then repay the bridging loan. This can help avoid penalties or fees or can prove to be a more affordable loan than the original one that is then repaid.

Find out all you need to know about development exit loans here.


Whether bridging loans for conversions, or a development exit loan, MFS can help. You can use our bridging finance calculator to establish how much you could borrow and what the terms of the deal might look like.

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Contact us

Speak to us on the phone, via chat or email about your case, however complex it might be. We have a friendly, dediciated team and one of our underwriters will be happy to help you with your query. We will try our best to say yes to you, instead of finding a reason to say no.

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