Converting commercial and industrial property into rented residential accommodation : development of a decision support tool

Abstract

Purpose: This study aims to develop a decision-making tool that assesses the economic feasibility of converting commercial and industrial buildings into rented residential accommodation. This tool also enables developers to provide high-quality rented residential accommodation that contribute to the gentrification of formerly industrialised inner city or developed areas. Design/methodology/approach: The overarching epistemological approach adopted used inductive reasoning and a postpositivist philosophical design to structure the research problem and devise new theories about the phenomena under investigation. From an operational perspective, a two-phase “waterfall” research approach was adopted. Phase one used extant literature to identify development factors and variables for consideration, risks posed and conversion appraisal criteria. Two case studies formed the basis of a cross comparative analysis, namely, a new build and conversion of a former industrial building into rented residential accommodation. Phase two identified development appraisal criteria, conducted a cost analysis and premised upon the findings, developed a decision support appraisal tool as a “proof of concept”. Findings: The research combined key decision factors and variables that assist property developers when evaluating whether to convert commercial and industrial property into rented residential accommodation. The appraisal tool’s functionality was validated via a focus group discussion with senior property developers to ensure that assessment criteria and development weightings were appropriate. Feedback revealed that the tool was suitable for purpose and should now be adopted in practice and refined as appropriate and with usage. Research limitations/implications: The appraisal tool presented could yield a far more accurate means of decision-making which, in turn, could ensure that predicted investment returns are received (thus reducing errors and lowering risk for investors). Future work is required to robustly test and validate the tool’s accuracy in practice. It is envisaged that future projects will provide a rich stream of data for such testing. Originality/value: To the best of the authors’ knowledge, this work constitutes the first attempt to conceptualise a decision support tool for rented residential property development.