The local authorities using real estate for good

There are government plans to potentially force local authorities to divest parts of their estimated £23bn of real estate holdings to help plug budget shortfalls of £3bn to £4bn over the next two years. This, combined with rhetoric that local authorities have perhaps invested unwisely in property over the past decade, utilising cheap money through the Public Works Loan Board, would make it easy to suggest that selling is the right thing to do. But local authority investment into real estate and partnership with the private sector in property can be hugely beneficial. Here, we take a look at five projects where council investment and partnership are adding back to place, creating security of development, the ability to curate, and a focus on delivering quality services for local communities. Spelthorne Council Spelthorne Council was heavily criticised for over-utilising the PWLB and buying huge swathes of property. Over the past decade the borough has spent close to £1bn on commercial real estate, almost three times the amount of its nearest spending rival, Runnymede Borough Council. Much of that spending was on investment properties outside of its boundaries, including BP’s campus in Slough, Berkshire, which it bought for almost £385m in 2016. Less than £65m was spent on regeneration properties. The council was criticised by its members in 2021 for having “insufficient understanding” of the property portfolio and no defined project management methodology. Like all investment in property over the past decade, Spelthorne, if it was forced to sell today, would likely lose money on those assets. However, the council claims its has made a “healthy financial return” on its investment, generating around £50m per annum in rental income, which after paying interest, paying down debt and making provisions for the management costs of its commercial real estate portfolio, leaves it with around £10m to spend on services for residents, including new homes. Spelthorne adds that the investment properties helped it throughout the Covid-19 pandemic, allowing it to set aside rental income into a sinking fund, which currently totals around £38m. The council says it has collected 99% of rental income each year since 2020. Walsall Council Walsall Council spent £12.5m buying the 200,000 sq ft Saddlers Shopping Centre from Topland Group in 2017. It was criticised for the move, with critics claiming council funds should be spent on services. Further criticism came in the wake of the Covid-19 pandemic, as the value of the asset plummeted by £8.5m. However, a £23.5m grant from the Towns Fund, coupled with other grants, have enabled the council to push forward with plans for the site as part of a wider £1.5bn redevelopment of the town centre. The proposals aim to create a new mix of uses in the centre, with residential and office schemes, alongside retail and leisure. Tunbridge Wells Borough Council It is not always a local council that may have got carried away in a boom time and overspent on commercial property – it can happen to some of the expert investors too. That seems to have been the case in Tunbridge Wells, Kent, where the borough council seized on the opportunity to take full ownership of the 475,000 sq ft Royal Victoria Place shopping centre for a fraction of the price British Land paid for it in 2018. BL bought the 99-store shopping centre, which is anchored by Fenwick and Marks & Spencer, from Hermes for £96m. In October last year, the council, which has owned the freehold to the site since it was built in 1992, was able to buy the mall from the REIT for just £8.15m – less than 10% of what BL paid.  Under its ownership, the council believes it can ensure that Royal Victoria Place continues to play a role in maintaining the attractiveness of the town for residents, employees and visitors. The centre had a 33% vacancy rate when it was acquired. RivingtonHark has been appointed to advise on the strategic direction of the shopping centre, which it says is strategically important to the town. Stockton Borough Council More shopping centre acquisitions by a local authority – councils have spent £4.7bn on retail over the past decade – with Stockton-on-Tees buying the 350,000 sq ft Castlegate Shopping Centre fro £13.8m and splashing £7m on the 200,000 sq ft Wellington Square Shopping Centre in 2019. This was part of a council plan to take ownership of key sites across the town, giving it greater control over the redevelopment and future of its place. While the assets did provide some income for the council, they were not bought for rental purposes. The town has seen vacancy rates rise to almost three times the national average over recent years and said this was due to changing consumer habits and the fact many of the shops in its locale were poorly laid out and too big. The council has now demolished Castlegate and its adjacent Swallow hotel to create a new vision for the town.  The new vision is Stockton Waterfront, an urban park in the town centre, which, once complete, will provide a leisure centre and open flexible spaces for community and large-scale events. Sefton Council In early 2017, Sefton Council splashed £32.5m buying the 405,000 sq ft Strand Shopping Centre in Bootle. The council said it bought the Strand because it recognised how critical it is to the future of the town centre and that there was an increasing lack of investment from its private owners. The business case for acquisition was underpinned by a recognition that ownership of the Strand was essential to enable the wider regeneration of the town centre. Since buying the shopping centre, the retail market changed dramatically, with the Covid-19 pandemic impacting the sector even more. Those changes meant plans to use the scheme as a centre of regeneration were paused as the focus remained on managing the centre. However, recently the council has put forward proposals for repurposing the mall. With £20m of levelling-up funding secured in March 2023, the council now want to utilise the centre to catalyse development of a “sustainable and resilient” town centre. Plans include new leisure, education and health services, as well as more green space. Council leader Ian Maher said: “We have high ambitions for Bootle. By removing a small part of the existing building, we can make way for the revitalisation of the centre with attractive public spaces, which meets the needs of residents, businesses and visitors. By broadening the use of space in the town centre, retail will continue to occupy the majority of the space, but we will also be introducing dedicated space for education, health and social care uses.” By 2030 the council hopes to have reshaped Bootle and grown its reputation as a desirable residential, education and business location. It is working in partnership with the Liverpool City Region Combined Authority to transform the Strand. Images: Walsall Council; Stockton Borough Council; Sefton Council