How Much Does A Commercial To Residential Conversion Cost?

Search online for commercial to residential conversion costs and you will find figures from £800 to more than £2,500 per square metre. Both ends of that range are real. The difference is not the quality of the builder. It is the building itself.

We prepare feasibility studies for conversion projects across the UK, so cost is a question we deal with every week. This guide sets out what drives the cost, gives indicative ranges by building type, and walks through a worked example with round numbers.

One note before we start. Every figure in this article is indicative, at 2026 price levels, and excludes VAT, land purchase and finance. Use them to sense-check a deal, not to price one.

The honest answer: it depends on the building

Two office buildings can look almost identical from the street and cost very different amounts to convert. One might have a sound frame, a recent roof and windows that can stay. The other might need new services throughout, structural openings and a full recladding.

That is why per square metre benchmarks are a starting point, not an answer. Until someone has assessed the structure, the services and the planning position, any single figure is a guess.

The good news is that most of the big cost risks can be identified early from desk research, drawings and a site inspection. That is exactly what a feasibility study is for.

The main cost drivers

In our experience, six factors explain most of the variation between conversion projects.

First, the structure. If the frame, floors and roof are sound and the floor-to-ceiling heights work, you keep the most expensive parts of the building. If floors need strengthening or new openings, costs climb quickly.

Second, the services. Almost every conversion needs new electrics, plumbing, heating and ventilation, because residential demand patterns differ from commercial ones. The question is whether the incoming supplies and risers can cope or need upgrading too.

Third, the envelope. Windows, insulation and the roof usually need work to meet modern energy standards. Full recladding or window replacement across a whole facade is one of the largest single line items on many projects.

Fourth, the floor plate. Deep floor plates leave dark space in the middle of the building that cannot become habitable rooms. That pushes up the cost per sellable square metre even if the headline build cost looks fine.

Fifth, location and access. City centre sites with tight access, limited storage and parking restrictions cost more to build on than edge-of-town sites, because labour and logistics take longer.

Sixth, the planning route. A Class MA prior approval scheme usually keeps the external works modest. A full planning consent may come with conditions on materials, amenity space or highways that add cost.

Typical indicative ranges by building type

The ranges below are indicative only. They are 2026 price levels, applied to gross internal area, and they exclude VAT, professional fees and contingency. London and the South East tend to sit at the top of each range, and the North and Midlands nearer the bottom.

• Office in good condition, light-touch conversion: £900 to £1,400 per sqm
• Typical office to flats with new services and layouts: £1,400 to £1,900 per sqm
• Retail unit or bank branch to flats: £1,500 to £2,100 per sqm
• Pub, care home or other institutional building: £1,600 to £2,200 per sqm
• Full strip-back, listed or complex city centre building: £2,000 to £2,500 per sqm, sometimes more

If a quote or an appraisal sits well outside these ranges, it is not necessarily wrong. But it does deserve a question. Either the building is unusually simple, or something has been missed.

The hidden costs

A change of use from commercial to residential triggers full Building Regulations compliance. The building must perform as a home, not as an office, and three parts of the regulations catch people out most often.

Fire safety (Part B)

Flats need protected escape routes, fire doors, alarms and compartment walls and floors between each dwelling. Commercial buildings are rarely divided this way, so much of this is new work. Buildings above 11 metres face stricter requirements again, including sprinklers in new blocks of flats in England, and taller buildings carry further rules on staircases and external walls.

Fire strategy is also one of the matters a council can assess under Class MA prior approval. It pays to resolve it at feasibility stage, not on site.

Acoustics (Part E)

Part E sets minimum sound insulation between dwellings. Commercial floors and partitions almost never meet it. Expect new floor build-ups, resilient layers and lined walls between flats, plus pre-completion sound testing to prove the standard has been met.

Acoustic build-ups also eat height. On buildings with tight floor-to-ceiling dimensions, this can decide whether a scheme works at all.

Thermal performance (Part L)

Part L covers insulation, windows and heating efficiency. Most older commercial stock falls well short of current standards, so budgets need to allow for insulated linings or external insulation, new glazing and an efficient heating system. This work overlaps with the envelope costs described above, which is why the envelope so often dominates the budget.

Beyond the regulations, allow for asbestos surveys and removal in buildings constructed before 2000, new drainage connections, and utility upgrades. None of these are exotic. They are simply easy to forget when a deal looks exciting.

Budgeting rules of thumb

For an early-stage appraisal, we suggest the following approach. All of it is indicative and should be replaced with real figures as the project develops.

• Price the build on gross internal area using the ranges above, then check the result against the net sellable area, because you only sell the net.
• Add 10 to 15% of the build cost for professional fees, covering architecture, structure, services, fire, acoustics and building control.
• Add a contingency of at least 10% on any building you have not opened up. Reduce it only when surveys justify it.
• Check the VAT position early. Qualifying conversions that change the number of dwellings can attract the reduced 5% VAT rate on construction work, though professional fees remain standard rated. Take specialist VAT advice, because the rules are detailed.
• Check whether the Community Infrastructure Levy applies. Existing floorspace in lawful use is usually deducted from the calculation, so many conversions pay little or nothing, but this varies by authority and scheme.
• Finally, test costs against value. A conversion only works if the end value comfortably exceeds the total cost. Our free GDV Calculator gives you a quick way to run that check, and our GDV guide explains the method behind it.

A worked example

Here is a hypothetical example with round numbers. It is not a real project and it is not a quote. It shows how the pieces fit together.

Imagine a two-storey office of 500 sqm gross internal area in a regional town. A feasibility layout shows it converts to 6 flats with a net sellable area of 410 sqm.

• Build cost: 500 sqm at £1,500 per sqm = £750,000
• Professional fees at 12% of build cost = £90,000
• Surveys, building control and statutory costs = £25,000
• Contingency at 10% of build cost = £75,000
• Total conversion cost = £940,000, or roughly £157,000 per flat

Now the value side. If each flat sells for £240,000, the gross development value is £1,440,000. That leaves £500,000 between conversion cost and end value to cover the purchase price, finance, selling costs and profit.

Whether that gap is enough depends almost entirely on what you pay for the building. On these numbers, a purchase price much above £250,000 would leave a thin margin once finance and selling costs are paid. That is the discipline a proper appraisal forces on a deal.

This is the analysis we carry out in every feasibility package: a tested layout, unit schedule, indicative costs and a clear view on whether the numbers stack up before you commit to a purchase.

Frequently Asked Questions

How much does it cost to convert an office to flats in the UK?

As an indicative 2026 range, most office to residential conversions cost £1,400 to £1,900 per sqm of gross internal area, excluding VAT, fees and contingency. Light-touch projects on sound buildings can come in below that, while complex or listed buildings can exceed £2,500 per sqm. The building's condition, services and floor plate drive most of the difference.

Is converting a commercial building cheaper than building new?

Often, yes, because the frame, foundations and roof already exist and the programme is usually shorter. But it is not guaranteed. A building that needs structural work, full recladding and new services can cost as much as new build, so the comparison has to be made per project, not assumed.

What VAT rate applies to a commercial to residential conversion?

Construction work on qualifying conversions that create a different number of dwellings can attract the reduced 5% VAT rate rather than the standard 20%. Professional fees such as architects and surveyors remain standard rated. The rules sit in HMRC's VAT Notice 708 and are detailed, so take specialist VAT advice before you fix your budget.