Property: It pays to live at the office: Commercial properties in London are being turned into flats and houses. Amanda Seidl investigates

A bed in the office must have seemed a useful accessory to many an overworked executive burning the midnight oil, but how many people would consider going the whole hog and converting the office into a home?

It's an idea that has caught the imagination of developers desperate to unlock the potential of hundreds of empty office buildings in London's West End. They think it will appeal to buyers: instead of buying a home steeped in social history, it may be possible to sleep where famous boardroom coups were staged, or in the case of one planned conversion, where MI6 agents may have plotted the end of Communism.

The developer Regalian, pioneer of Eighties Dockland developments such as Free Trade Wharf, is hoping to catch rising residential values with a conversion of Alembic House, London. The Sixties office building on Albert Embankment was reputedly a former home to MI6 during the Seventies. The department has now moved further down the road to its Terry Farrell- designed monolith, built by Regalian.

Since the secret agents moved out, Alembic House has been mostly empty, its stunning views of the Houses of Parliament across the river enjoyed only by Lord Archer who has a penthouse flat in the building. Regalian intends to create 36 luxury apartments, all enjoying the same panoramic vista across the river.

No prices are available yet, but Julian D'Arcy of Cluttons, Regalian's agent, describes it as 'the best conversion opportunity in London', and expects prices to reflect this when the development is completed in 1995.

Regalian's plans are the largest and most prestigious example of the conversion fever sweeping central London. Out-of-date Sixties and Seventies offices in Victoria and Kensington are being earmarked for a new life as flats, while in Mayfair, Georgian mansions are being restored to their original use as smart city houses.

The key to this change of use lies in the devastating property slump which, over the past three years, has halved the value of office buildings. Soaring property values during the Thatcher/Lawson Eighties economic boom spawned a development bonanza, but before many buildings were completed, recession had hit demand for offices and it soon became clear that supply vastly exceeded demand.

Some 32 million square feet of office space - equivalent to a town the size of Bracknell - now stands empty in central London. The annual cost of maintaining a 20,000 sq ft office building in central London is put at pounds 266,000 by Cluttons' research department, which states in its recent Home/Office Report that 50 per cent of the office developments with planning permission are not worth progressing as office properties even if the market recovers. Landlords face a choice - make their buildings uninhabitable to save on the rates bill, or find an alternative use.

Even in London's smartest business address, St James's Square, properties are now worth more when offered to house buyers than as corporate headquarters. After a year on the market without a nibble of interest from office tenants, 4 St James's Square has just been sold to a wealthy American for conversion to a family house the size of a small hotel.

'The age of the big house is back again,' says Peter Wetherell of estate agent Wetherell & Co, who sold the building for pounds 9.5m. 'Luxury residential is worth more than offices.'

As offices, 4 St James's Square was valued at pounds 6.5m. Its new owner will have to spend at least pounds 10m converting the grade II listed building back to its original splendour, but perhaps that is a small price to pay for an address within a stone's throw of the Court of St James and Clarence House.

But not every building can be converted; many modern office buildings are structurally unsuitable for residential use or are located in areas where the planning authority would not permit a change of use.

'In theory, Sixties offices are the most suitable for conversion and, by happy coincidence, these are the same buildings that are proving hardest to let as offices,' says Peter Hawkes of the surveying firm Chesterton.

Victoria, with its large numbers of Sixties office blocks, is the favourite hunting ground for potential conversions. At least 10 commercial buildings have been sold this year - some were targeted for eye-catching landmark offices during the boom, but are now destined to become private apartments or low-cost homes for housing association tenants.

Housing associations are emerging as important players in the market - the Peabody Trust has just bought the former Today newspaper offices at 70 Vauxhall Bridge Road for conversion to low-cost homes.

Office conversions, for whatever market, represent a useful means of recycling redundant property. The country is suffering from a shortage of housing and a surfeit of office space. The National House Builders' Federation wants to see 230,000 new dwellings built per year, double the number currently being constructed. What could be more natural than to convert some of the commercial surplus to satisfy the domestic shortage?

Anne Spackman returns next week.

(Photograph omitted)

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