The Government of the Canary Islands is considering the alternative of converting commercial premises and offices into homes to address the housing emergency. Official data from the Cadastre in 2023 showed that there were 76,790 premises and 15,497 offices registered in the Archipelago, and due to the Covid pandemic crisis, up to a third – around 27,000 – were left inactive.
Real estate experts estimate that currently there are approximately 20,000 disused establishments of this type on the Islands, with only 10% to 15% of them meeting the necessary conditions to be converted into homes, which equates to about 4,000 properties. These establishments must meet minimum habitability and luminosity requirements, have adequate height, and not be located below street level, among other criteria.
The decree law of urgent housing measures specifies that premises or offices eligible for conversion must be in buildings with predominantly residential usage. The conditions established by the Government are stringent: at least 50% of the resulting homes must be allocated for privately promoted protected housing, and holiday rentals are prohibited in these converted properties.
Municipal regulations
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This approach is not entirely new in the Archipelago. It is the responsibility of local councils to consider this option in their regulations. In 2021, the Santa Cruz de Tenerife City Council approved the possibility of changing the use of ground floor premises in its Building Ordinance.
The Cadastre has registered 76,790 commercial premises and 15,497 offices in the Canary Islands
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In other autonomous communities such as Galicia, Castilla y León, and Extremadura, as well as cities on the mainland, similar initiatives have been approved with varying degrees of success. Just recently, the president of the Madrid Community, Isabel Díaz Ayuso, announced the temporary possibility of converting office buildings or plots into homes for a period of two years. This transformation would be allowed through licensing without the need for urban planning, as long as the homes are used for affordable rental purposes.
In many urban areas and neighbourhoods in the Islands, a significant number of vacant and neglected commercial premises can be observed. Construction entrepreneurs and real estate professionals see this alternative as not only a means to repurpose these facilities for housing but also as a necessary urban regeneration in these areas.
However, not all disused premises are failed businesses. In certain areas, especially in the prime urban centres and main tourist zones of the Islands, such establishments prove to be highly profitable in real estate portals, despite their appearance of neglect and disrepair.
An example is the latest real estate asset profitability report from El Idealista, which indicates that buying a commercial property in Las Palmas de Gran Canaria for rental purposes yielded a gross return of 9.3% in the fourth quarter of 2023, making commercial premises the most profitable real estate product in the city, surpassing offices (7.4%), residential properties (6.4%), and garages (4.8%). In Santa Cruz de Tenerife, this return increases to 10.4%.
Professionals view the change of use positively, but it is not the solution to the housing shortage
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Real estate managers consider this initiative as part of the increasing options being considered by public administrations to address the serious housing problem, but it is by no means a definitive solution. This is because not all owners of premises with suitable conditions are willing to convert them into homes if they are subject to stringent government requirements. “Any measure that promotes the supply of properties is welcome,” says Vanessa Rubio, although the regulations need to be specified to ascertain whether local councils and property owners implement the measure.
Opportunity
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Raquel Herrera, of the Canarian Association of Real Estate Management Companies (Acegi) in Tenerife, believes that this alternative “is a way to relieve the existing saturation and an opportunity for owners of vacant premises to re-enter the market, but it is not the solution to the housing shortage.”
Meanwhile, José Saavedra, spokesperson for Acegi in the province of Las Palmas, warns that the conversion of premises and offices into homes requires changes to urban planning and that local councils delineate the requirements. The fact remains that there are many closed premises, even in areas that are traditionally commercial, “because post-pandemic, offices have seen a greater recovery than premises.” The real estate sector has repeatedly emphasized the need forIncluding this kind of options as an additional choice and if the regional regulations allow it, municipalities that are currently reluctant to allow this change of use could facilitate it, especially in the most degraded areas.
The potential to transform premises and offices into homes is a trend that is gaining traction nationwide. In 2022, 5.9 million square meters were converted in Spain, marking a 16.2% increase from the previous year, according to a report by the College of Registrars. In Madrid, for instance, there has been a 26% increase in premises converted into housing since the onset of the pandemic, according to the real estate portal Fotocasa. Offices, shops, or even former banks are not initially equipped for residential use, making it legally impermissible to live in these premises. Nonetheless, these properties can be lawfully transformed into homes through a change of use application at the local council, provided that a set of requirements are met. In all autonomous communities, a minimum usable surface area of between 35-40 square meters is stipulated, or 25 square meters if the home is intended to be a studio. Additionally, the premises must be constructed on urban land. Furthermore, compliance with different municipal regulations, contingent upon the autonomous community in which the premises are situated, is mandated. The Government of the Canary Islands has mandated that at least 50% must be allocated to protected housing, making it necessary to review the conditions outlined in the decree law upon its publication in the BOC. A technical reform project must be prepared and submitted to the city council for validation. In cases where the premises are located within a neighborhood community, approval from the community will be required to effect this change of use, irrespective of whether it is a commercial premises or spaces originally designated for offices. | RAD
