Conversion of Offices into Residential Flats
68-70 MARKET STREET HYDE, MANCHESTER SK14 1ES
Here’s a property we generated at from our sell commercial property marketing that is up and coming at our ‘Deal Clinic Tuesdays’
The property is currently a four-storey mid-terrace building. The property comprises a ground-floor commercial unit with vacant residential units on the upper floors. The ground floor comprises a double commercial unit, which is currently a café. This unit has been sold off on a long leasehold at a peppercorn rent. The first, second and third floors are currently vacant and have planning consent to convert to seven apartments. In terms of the structure, the building has been erected using solid wall construction, with brick finish. The property is set beneath a pitched tiled roof, formed by a timber framed construction. Fenestration throughout the property is single-glazed set within timber frames.
Photographs of the property can be found at Appendix A.
Consent has been granted to convert the upper floors to accommodate four studio flats, a one bed flat which benefits from a large terrace and two two-bedroom duplex flats.
Schedule of Proposed Accommodation
|Studio Flat 1|
|Studio Flat 2|
|1 Bedroom Flat|
|Open Plan Kitchen / Living Room|
|Studio Flat 3|
|Studio Flat 4|
|2 Bedroom Duplex Flat x2 (Mirrored Flats)|
|Open Plan Kitchen / Dining Room|
|Third Floor||Bedroom 1|
|External||Terrace (1 Bed Flat)|
|1 Bed, 1 Bath||First||625|
|2 Bed, 1 Bath||Second/Third||804|
|2 Bed, 1 Bath||Second/Third||805|
Property has a gross internal floor area of 2,598 ft² (241 m²).
Measurements and calculations exclude all floor space with a headroom height of less than 1.5M. Also excluded are any loft rooms without a full stair access, external rooms, garden buildings, pavement vaults, storerooms or a cellar space that is not either a habitable room, has direct access from the interior of the property and/or a headroom height of less than 1.5M.
The subject property was internally presented in poor condition, currently being a building site. Externally, the property was well presented, being in a condition that is consistent with its age and construction. There was no evidence of movement noted to the external walls and all appeared to be plumb and upright. Ongoing routine maintenance will be required to keep the property in good order.
There was evidence of dampness noted on almost every external wall, primarily on the rear wall. We recommend a qualified damp specialist report on the source of the damp and to advise on any remedial works required. Allied repairs should be completed by a specialist damp contractor under professional supervision. It is not possible to comment on the condition of unseen or concealed and covered parts of the building or any potential liability for defects in these inaccessible areas.
|Wall Constructions||Solid wall construction with painted and plastered internal walls|
|Roof Construction||Traditional pitched tiled roof with clay tiles|
|Floor Construction||Suspended timber upper floors|
|Window Fenestration||Single glazed casement windows, set within timber frames|
|Parking||No parking available|
|Drains and Services||Mains, gas, water and drainage services. Electricity to be confirmed|
The subject property is located in the Hyde district within the administrative boundaries of the Tameside Metropolitan Borough, in an established neighborhood consisting of a mixture of residential and commercial properties.
The Metropolitan Borough of Tameside is a metropolitan borough located in Greater Manchester. It gets its name from the River Tame, which flows through the borough, and contains the towns of Ashton-under-Lyne, Audenshaw, Denton, Droylsden, Dukinfield, Hyde, Mossley and Stalybridge. Its western border is situated approximately 4 miles east of Manchester city centre. Tameside is flanked by the metropolitan boroughs of Stockport and Oldham to the south and north respectively, the city of Manchester to the west and the borough of High Peak in Derbyshire to the east across Longdendale.
The property is a commercial unit, located on the western side of Market Street, between the junctions of Corporation Street and Croft Street. The front of the property faces approximately east, with the rear elevation facing towards the west.
The closest Station to the subject property is Hyde Central Station, which is 0.2 miles away and lies on the line between Manchester Piccadilly and Rose Hill Marple. The area in which the property is located has numerous and regular bus services running through Market Street, connecting it with all adjacent Manchester locations and all other local points of interest.
The M67 runs north of the property and is a major thoroughfare that goes east and west. The M67 becomes the A57 to the east, which leads to the center of Manchester. The road also goes west, where it becomes the A628 and goes out of the area.
The property is located in the town centre of Hyde. There is a wider range of shops, restaurants and other facilities at the nearby shopping park in Denton.
Key Strengths and Weaknesses
- Desirable Town Centre location
- Good travel connections to Manchester and surrounding areas
- Planning consent for conversion of upper units to residential
- Property currently a building site
- No off road/garaged parking available with on street parking within a controlled parking zone (CPZ)
- Currently not habitable – limited mortgageablity
- Low demand for flats in the area
- Except for Flt 1 – the proposed flats do not have outside space
- Good letting potential
- Refurbishment and extension potential
- Continued low interest rates
- Global Economy
- Potential future increase in interest rates
- Impact of Coronavirus
- Impact of the 3% stamp duty surcharge
- The property is owned on a freehold basis and assume that the title is free from any restrictions, encumbrances, rights of way, easements or other matters which would adversely affect value or marketability.
We have made enquiries of the Valuation Office Agency (VOA) website of which no information was displayed for the subject property.
The subject property lies within the administrative boundaries of the Metropolitan Borough of Tameside, being governed by local planning policies within the Local Development Framework (LDF) and Core Strategy, as well as national planning policies.
Where we have been unable to make verbal enquires, online enquiries of the Local Authority have been undertaken to confirm town planning matters, which may affect our valuation. We believe that the information that we have obtained is correct, but we cannot accept liability for either incorrect or for material omissions in the information gleaned, including statutory notices or contraventions of statutory requirements.
Listed Building and Conservation Area Status
We have made internet-based enquiries on the Metropolitan Borough of Tameside’s website, which has advised that the subject property does not have Listed Status and does not lie within a Conservation Area.
Article 4 Area
The property does not lie within an Article 4 Area.
There are certain permitted development rights that cannot be withdrawn by an Article 4 direction. These exemptions are to ensure permitted development rights related to national concerns, safety, or maintenance work for existing facilities cannot be withdrawn.
We have noted below the subject property’s recent planning history:
|13/00966/FUL||Alterations to existing frontage||Granted 20/01/2014|
|19/00137/FUL||Change of use of ground floor to café (use class A3), and conversion first, second and attic floors to 7 apartments||Granted 16/08/2019|
We have assumed that the property has planning consent for its existing uses and that it is not affected by any statutory notices, enforcement proceedings or planning proposals. A formal planning search should be obtained to include confirmation that there are no proposed developments within the vicinity, which would adversely impact upon the subject premises together with the land use allocation of the property within the relevant Local Plan. We do not consider that there is any significant prospect or potential for Change of Use or other development of the subject property or those in the vicinity, which would materially affect the value of the subject property.
We have made enquiries to the Local Authority regarding the status of Market Street, to which we were informed that the street is ‘made up’ and is adopted by the Local Highways Authority, being maintainable at public expense.
In assessing our opinion of Market Value, we have considered both available and transacted comparable evidence in the local area. In doing so we have relied upon verbal descriptions and marketing details, where available, and please note that we have not undertaken an inspection of comparable properties and therefore cannot confirm the exacting specification of the evidence stated herein.
Evidently, under current market conditions, there can still be a significant difference between asking prices and what potential purchasers are prepared to pay, and at the present time prices are on the whole being negotiated downwards.
|Subject Property||Address||Type||Size ftsq||Date||Sold Price (£/Ftsq)||Comments|
|Subject Property||68-70 Market Street SK14 1ES||Planning for 4 x Studio x 1 Bed x 2 Bed||323ft2 635ft2 804ft2/ 805ft2||Condition: new build, assumed good/modern Parking: none Outside Space: 1-Bed flat benefits from terrace|
|1||77a Market Street SK14 1HL 0.1 miles||Flat Above Shop 2 Bed 1 Bath||882||Feb 2021||£113,000||Location: similar value Condition: assumed lower standard Parking: none Outside Space: none Note: access from rear of building – less desirable than subject|
|2||Apartment 1 Hollows Court Ridling Lane SK14 1NR 0.2 miles||Purpose Built Gnd Flr 1 Bed 1 Bath||484*||Aug 2021||£92,000||Asking: £95,000 Location: higher value block, not above shops Condition: good tenanted Parking: 1 x allocated Outside Space: Juliet balcony|
|3||Apartment 9 Godfrey Mill Commercial Street SK14 2HH 0.4 miles||Purpose Built 1st Flr 2 Bed 2 Bath||646*||Apr 2021||£109,000||Asking: £110,000 Location: higher value block, not above shops Condition: good tenanted Parking: 1 x allocated Outside Space: communal garden|
|4||Apartment 6 Godfrey Mill Commercial Street SK14 2HH 0.4 miles||Purpose Built Gnd Flr 2 Bed 2 Bath||624||Oct 2021||£127,000||Asking: £125,000 Location: higher value block, not above shops Condition: newly refurbished Parking: 1 x allocated Outside Space: communal garden|
|5||Flat 6 Church Lane SK6 7AR 4 miles||Second Floor |
Above Shops 2Bed 2 Bath
|698||Asking: £240,000||Location: higher value area Condition: new build, similar to the subject property Parking: allocated Outside Space: Juliet balcony Note: New Build|
|6||Albert Place SK6 7RP 3.9 miles||Purpose Built Flat Above Shops 2 Bed 2 Bath||702||Asking: £235,000||Location: higher value area Condition: new build, similar to the subject property Parking: none Outside Space: none Note: New Build|
|7||2b Woodend OL4 5TF 5.8 miles||Ground Floor Flat 1 Bed 1 Bath||560||Asking: £145,000||Location: higher value area Condition: new build, similar to the subject property Parking: allocated Outside Space: patio garden Note: New Build|
|8||1 Every Street M4 7LT 6 miles||Third Floor Flat 1 Bed 1 Bath||473||Asking: £144,888||Location: higher value area Condition: new build, similar to the subject property Parking: none Outside Space: balcony Note: New Build|
The distances provided are between postcodes.
The measurements given are for guide purposes only, however, we have assumed that each of the aforementioned comparable properties has been measured in accordance with RICS measurement guidelines.
Analysis of Sale Comparable Data
The comparable data obtained show that two-bedroom flats within the locality of the subject property, dependent on the size, accommodation provided, condition and immediate location have sold between
£92,000 and £240,000.
77a Market Street: This property is a larger two bedroom duplex flat above a café on the same parade as the subject. We were unable to ascertain the internal condition of the subject when sold, however we can assume that it is in a lesser condition than the newly developed subject units. Access to the property is at the rear via a car park used for deliveries to the retail units, which is less desirable than a front or rear access. It is in a similar value location to the subject. The property sold in February 2021 at £113,000. Although we have noted this sale, we can only give it limited strength as it was a private sale and we are unaware of the terms/details of the sale.
Apartment 1 Hollows Court, Ridling Lane: This property is a smaller one bedroom one bathroom ground floor flat within a purpose-built block of flats. Internally the property was in a reasonable condition, assumed inferior to the newly completed units of the subject. In terms of location, Hollows Court on Ridling Lane is a higher value block, not being above shops. The property also benefits from an allocated parking space which is desirable in the area. The property sold in August 2021 at £92,000. We would expect the subject one- bedroom units to achieve a similar value as although they will be larger and newly completed to a higher standard, they are in an inferior location with no parking.
Apartment 9 Godfrey Mill, Commercial Street: This property is a smaller two bedroom two bathroom first floor flat within a purpose-built block of flats. Internally the property was in a reasonable condition, assumed inferior to the newly completed units of the subject. In terms of location, Godfrey Mill on Commercial Street is a higher value block, not being above shops. The property sold in April 2021 at £109,000. We would expect the subject two-bedroom units to achieve a similar value as although they will be larger and newly completed to a higher standard, they are in an inferior location with no parking.
Albert Place, Marple: This property is a smaller two-bedroom one-bathroom new-build flat above a shop. Internally the property is of good/modern condition as it has recently been built. The property does not benefit from any outside space, nor any off-street parking. In terms of location, Marple is a higher value residential area than Hyde. The property is currently on the market asking £235,000. We would expect the subjects to achieve a lower capital value as they are larger properties and situated in a higher value residential area.
Flat 6, Church Lane, Marple: This property is a smaller two-bedroom two-bathroom new-build flat on the top floor above a shop. Internally the property is of a good/modern condition as it has recently been built. The property benefits from a Juliet balcony and allocated off-street parking. In terms of location, Marple is a higher value residential area than Hyde. The property is currently on the market asking £240,000. We would expect the subjects to achieve a lower capital value as although they are larger properties and situated in a higher value residential area.
As this property has planning consent for development, we have used the residual valuation method. This method looks to value the Gross Development Value (GDV) which is the value of the development once completed, less the costs of the development, including the construction and associated costs, finance costs, sales costs and the developer’s profit.
We have utilised the comparable valuation method in arriving at our opinion of the GDV of the completed flats within the development. We have analysed sales comparables of flats within the vicinity and wider area and made adjustments for location, size, condition, outside space etc.
In our opinion the table below provides a breakdown of the GDV, assuming that all units are built, in line with the planning consent to a good modern standard and compliant with building regulations, they would command an aggregate GDV in the region of £590,000.
|3||1st||1 Bed, 1 Bath||635||£90,000|
|6||2nd||2 Bed, 1 Bath||804||£100,000|
|7||3rd||2 Bed, 1 Bath||805||£100,000|
To complete the residual valuation, we have deducted the costs of the development from the GDV. We have been provided with a schedule of works and costings for the development and we have added other associated costs, purchasers costs, finance and sales fees.
For the purposes of this valuation, we have assumed 5% acquisition costs which includes SDLT, Legal and agency fees. We have included development finance on 75% of purchase price and development costs at 3.5%. We have not made an allowance for and CIL or S106 costs, should these be applicable, we reserve the right to amend our valuation accordingly.
We have been instructed to use the construction costs provided by the developer. The costs were at £140,000, which we have used for the basis of our analysis. Although we are not cost consultants, these costs appear below the BICS rates for the area. We would recommend these costs be tested more thoroughly by a cost consultant. The BICS rate for a block of seven flats over three storeys for the Manchester area is £1,980/m2 on the Gross External Area, which is considerably higher than the costs provided. The lender should also be aware and consider the recent increase in build costs, and therefore be mindful of the LTV of the loans to reflect the risk in the project.
We have been instructed to include the contingency and professional fees within the development costs provided, therefore have not made extra allowance for them. Had we not been instructed to include these in the development costs, we would normally allow circa 10% for professional fees and similar for the contingency. We have allowed 1.5% for sales agents and legal fees. We have allowed for developers profit at 20% profit on costs which is in line with industry standards.
We have allowed for development finance at 8% and assumed the development/refurbishment will take circa nine months to complete. In our opinion taking into consideration the above factors, we consider that the residual value of the site in its current state would command a sale price in the region of £300,000.
|Acquisition Costs (SDLT and legal fees)||5%||£15,000|
|Finance on 70% of Purchase||3.5%||£15,000|
|Finance on Development costs||8%||£8,400|
|Sales Agents Fees||1.5%||£8,850|
|Total Gross Development Cost||£189,350|
|Developers Profit on Cost||20%||£97,870|
A sensitivity analysis is used to understand the effect of a set of independent variables on some dependent variable under certain specific conditions. Due to the nature of the project and the development risks involved, we have created a sensitivity analysis, which tests changes in build costs and GDV using increments of 10% for costs and 5% for GDV (we have rounded numbers to the nearest £50,000).
Valuing property based on the residual method, with multiple variables, the sensitivity analysis above tests two of the key features that impact value. This enables the lender and those involved in the project to understand their risk tolerance levels. In the current market, with the uncertainty of the impact of the Coronavirus, demand from developers has reduced and are taking a more cautious approach. The lender should also be aware and consider the recent increase in build costs, and therefore be mindful of the LTV of the loans to reflect the risk in the project.
In arriving at our opinion of market value, we have considered that in general terms the property is less well located and positioned, compared with other properties that have been sold or are currently being marketed in the area. This is because they are above a commercial unit, have limited outside space and do not benefit from parking.
With this information we have been able to obtain reasonable comparable evidence to justify the value that we have provided within this report.
We have been made aware of other properties within the area that have been on the market with similar attributes to the subject property which have been sold over the past year.
Whilst our valuation has had regard to relative price per sq ft we also have regard to the actual “lot size” value of the property and the comparable data obtained. We have made allowances for the differences in location, condition, position, extent of accommodation, if car parking is available and proximity to transport and amenities.
In our opinion, taking into consideration the above factors, we consider that the subject property, presented in its current condition would command a sale price equating to £300,000, which is in line with the tone of values achieved locally and reflects the various strengths and weaknesses as summarised.
Demand, Saleability & Sustainability
In terms of saleability of the subject property, we would anticipate reasonable demand from a limited market. Demand is likely to come mostly from developers and buy to let investors for this specific area.
It is noted that some of the comparable data sale completions happened during the governments ‘Stamp Duty Holiday’. The stamp duty level is now back to its original levels, we would recommend that the lender takes this into account and that there may be a short to medium negative impact to the market.
We consider that a marketing period of around 3 to 6 months would be required in order to achieve a sale at the valuation figure provided.
We would anticipate demand for properties akin to that of the subject property to remain sustainable for the short to medium term, largely owing to its desirable location and close proximity to local amenities and facilities.
As stated, our current opinion of value has attempted to reflect market conditions as we currently find them and our valuation reflects prices being paid.
The subject property will be newly built, we would therefore consider that the flats would hold a ‘premium’ over much of the competing housing stock, they will hold effectively a ‘new build premium’, whereby the property may achieve a greater price than other available housing stock, either on a rate £/ft² or capital value basis. We would caution that once the property has been occupied and undergone a period of ‘wear and tear’, even on a short term basis, the property may not command the same ‘premium’ as at the time of sale.
|Address||Type||Size ft2||Date||Let PCM||Comments|
|68-70 Market Street SK14 1ES||Planning for 4 x Studio 1 x 1 Bed 2 x 2 Bed||323ft2 635ft2 804ft2/ 805ft2||Condition: new build, assumed good/modern Parking: none Outside Space: 1-Bed flat benefits from terrace|
|1||78a Market Street SK14 1ES||Flat Above Shops 1 Bed 1 Bath||388||Apr 2021||£500||Location: adjacent property Condition: lower standard Parking: none|
|2||5 Cotton Tree Court SK14 1LU 0.1 miles||Purpose Built 1 Bed 1 Bath||506||Dec 2021||£525||Asking: £550 Location: similar value Condition: lower standard|
|3||7 Hollows Court SK14 1NR 0.5 miles||Purpose Built 2 Bed 1 Bath||581||Sep 2021||£625||Asking: £625 Location: similar value Condition: good, lower standard Parking: allocated|
In our opinion the newly constructed and refurbished subject property of seven units would achieve an aggregate rent of £3,000 PCM once the scheme is complete to a good modern standard.
Market Value of the subject property in its existing condition, with the benefit of Vacant Possession as at the date of valuation:
Having regard to the foregoing and subject to the assumptions set out earlier within this Report, we are of the opinion that the Market Value (as defined earlier in this report) of the freehold interest in the subject property as it exists, on the basis of full Vacant Possession as at the date of this report, is:-
(Three Hundred Thousand Pounds)
Market Rent of the subject property when converted into seven newly complete self- contained units, as at the date of valuation:
Having regard to the foregoing and subject to the assumptions set out earlier within this Report, we are of the opinion that the Market Rent (as defined earlier in this report) of the subject property when converted into seven newly complete self-contained units, as at the date of this report, is:-
£3,000 Per Calendar Month
(Three Thousand Pounds Per Calendar Month)
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