Government property agency launches with hunt for chief exec

The Government Property Agency has launched today, creating a powerful body that will asset manage multiple departments’ estates for the first time, oversee the sale of surplus public buildings, and release a new wave of civil service office requirements. A new chief executive is being sought for the property asset management organisation, which aims to create £2bn of savings from the government’s central estate over the next 10 years. GPA shadow chief executive Ian Playford, a former JLL executive who was brought in to set up the agency, is stepping down from the organisation. GPA shadow chair Liz Peace, who has overseen the two-year creation of the body and will lead the chief executive recruitment process, said: “I’ve got a very open mind about who that person might be. “I think I will want it to be someone with a good strong commercial property background, but we also need it to be somebody who’s sensitive to the needs of government and the public sector. “So I’m looking for an exceptional person out there who fancies the challenge of building on what Ian’s already done.” Pooling government assets The new agency will control the property portfolios of multiple central government departments, allowing it to strategically manage assets. As it goes live today, the agency will control the estates of the Cabinet Office and the Department for Business, Energy and Industrial Strategy. The Department for Environment, Food and Rural Affairs’ estate will transfer to the agency at the end of 2018. Other departments including the Department for Education and the Ministry of Justice will join in 2019 and 2020, bringing professionals from their estates teams with them. However, specialist assets such as prisons and courts will remain with departments’ estates teams because the GPA has limited scope to asset manage them.Ministry of Defence, which has its own Defence Infrastructure Organisation and the Department of Health, which has its own propco, NHS Property Services, will not transfer their estates to the agency, but could participate in initiatives run by the GPA where appropriate. Peace said: “We are looking at the generic estate, the sort of estate that a Landsec or a British Land would have, and looking at how you could manage it effectively and efficiently, dispose of what you don’t need, acquire what you do need…in order to provide the most cost effective, efficient space for government to work in.” Government departments have been under pressure from the Cabinet Office to rationalise their estates, and have shed more than 1.1m sq ft since 2015-16, according to the State of the Estate report released last week. QUICK EXPLAINER What is the GPA? The Government Property Agency is a new property asset management organisation which will strategically manage the estates of multiple central government departments, starting with the Cabinet Office and the Department for Business, Energy and Industrial Strategy. The agency belongs to the Cabinet Office and represents the interests of the civil service chief executive John Manzoni. However, it has its own board and chief executive. The activities of the agency will be in line with the government’s aims to rationalise its estate, promote smart working by providing tech-enabled workspace, create a more flexible offices and warehouse portfolio; and redistribute mandarins so there are less in central London and more in the regions. Key projects to watch  The hubs programme, which has already produced more than 7m sq ft of office requirements for new civil service hubs around the country, will be transferred from the Government Property Unit to the GPA. Details of a new wave of requirements, which will see material migration of civil servants from central London to the regions, are due to be released in an updated estates strategy later this year. The agency is prioritising the rationalisation of central government’s 700-asset warehouse portfolio, which could include freehold sales and new logistics requirements for centralised warehouse hubs. Another area of potential sales and consolidation is the sciences estate. The agency is exploring whether there is scope for consolidation of generic laboratory space which is occupied by departments such as DEFRA and BEIS. The GPA aims to help departments meet their rationalisation targets by initiating cross-departmental estate strategies. The shadow agency recently completed a deal to allow the Department for Exiting the European Union and six other government departments to take more than 113,000 sq ft of office space let to Transport for London at 42-50 Victoria Street, SW1, which the transport agency is vacating as it relocates staff to its new headquarters at the International Quarter, Stratford. The GPA has taken the headline lease and then sublet to government tenants, allowing them to have greater flexibility. The building will accommodate 1,500 full time staff from key departments which have seen rising demand for workspace as a result of Brexit. Peace said the Victoria Street offices were “an example of what a central government property agency can actually deliver in terms of efficient, cost-efficient, effective, speedily available space to meet the needs of departments.” She added: “I think it’s really important that the departments of state are able to focus on what they want to focus on. Whether they’re Treasury matters or Brexit matters or whatever, they shouldn’t have to worry about their estate. They should have somebody else who can come in provide it [office space] for them, sort out any of their problems, sort out their expansion, their contraction. Government changes happen very frequently. You have a new government come in and suddenly you’ve got three new departments.” Departments that join the agency will transfer their freeholds onto the balance sheet of the GPA. Their leaseholds will be managed by the GPA, allowing the agency to take over responsibility for subleasing unused space to other government departments or the private sector. Hubs programme 2.0 The GPA has taken control of the government hubs programme, which was launched by the Government Property Unit and aims to co-locate 270,000 civil servants in around 20 key locations outside central London by 2023. Since 2016, the programme has launched requirements totalling more than 7m sq ft. Thirteen of the strategic hubs are being co-developed with HM Revenue & Customs and have already resulted in 12 major leasing deals, including 500,000 sq ft at Canary Wharf Group’s 10 South Colonnade, E14; 184,000 sq ft at Schroders and Stanhope’s Ruskin Square in Croydon; 270,000 sq ft at LGIM – Real Assets’ India Buildings in Liverpool; and 378,000 sq ft at MEPC’s Wellington Place in Leeds. The GPA is now preparing to launch a new wave of hub requirements, which are expected to cause significant net migration of civil servants out of London. There will be around 200 mini-hubs across the UK in secondary towns and cities, close to public transport infrastructure. “Touchdown spaces” might be located in operational buildings such as depots, job centres of libraries, with five to ten desks and limited facilities. Most of the civil service relocations from the first phase of HMRC-led requirements represent consolidation of the regional estate. Playford said: “There has been net migration out of London within that [first phase], but it’s a small percentage and I think future hubs will provide space for a greater number of civil servants moving away from the South East and that’s in discussion with departments at this present time. There’s 60,000 fulll time [civil service] employees in the centre of London and it’s looking in to the benefits of how many of those [need to be here] against the opportunity to have a broader regional platform of civil servants.” Playford said he could not confirm which departments will be leading the next wave of requirements as final decisions have not been made. However, further details are due to be released in the government’s next five-year estate strategy, which is currently in the final draft stage and is due to be released later this year. The new office requirements are being driven in part by a recognition that the civil service needs to attract new talent. “There’s a huge amount of target operating model changes in organisations which are needing new people, different types of people, to come in,” Playford said. “Being centrally located in certain locations will help with their recruitment, [accessing] the skills they need, and their [staff] retentions; and to be competitive against private sector companies. We will continue to finesse the types of buildings that we go for, depending on what our customers want.” The WeWork effect The cost of the first phase of the hubs programme was criticised by the National Audit Office in a 2016 report, which questioned whether adequate risk assessment had been carried out regarding the Government Property Unit’s commitment to 25-year leases with no breaks at two of the first regional centres. All of the 12 hubs it has committed to so far follow the long lease model. Would the GPA consider adapting the model for the next phase? “I think the comment of the NAO needs to be put in the context of the broader estate,” Playford said. “We will be providing long leases where it fits in with a broader government strategy. We know that long-term government is always going to be at the centre of Manchester, Bristol, and London. So, committing to 20 years, from a policy perspective or an estate strategy perspective, is no bad thing to do, and it gives you great access to benefits. The incentives that we got with Canary Wharf when we took 500,000 sq ft down there which was the biggest letting in 2016, were great for government and they helped play into the fit out cost.” While the GPA will take the long lease, it will sublease the space to different departments which it hopes will allow flexibility to accommodate the changing requirements of government. “The ambition of the GPA is to offer flexible leasing solutions like WeWork and other [serviced office] operators in the market,” Playford said. Peace added: “One of the reasons government is ready to be accommodated in this way is that technology enables a huge amount. I can remember a certain department many years ago decided that it would move to hot-desking and people working at home and the IT just didn’t measure up to it, never actually worked. “Now, we’ve actually got a model of working supported by technology, supported also I think by changes in society and the way people want to work. Department want flexibility because they want people all over the place. They’ve got the IT, we can provide that collectively as the GPA, so we can support this whole new approach to how people want to work.” Warehouse portfolio Significant savings have already been made from rationalising the government’s offices portfolio, so it will have to work harder to find consolidation opportunities. The hubs programme is on course to reduce the number of office buildings in the central estate by 75% to circa 200 by 2025, generating savings of around £2bn over 20 years. The next key target for rationalisation is the government’s circa 700-asset warehouse portfolio, from which the GPA aims to make around £100m in savings over the next 10 years. “Warehouses across government haven’t been looked at with the same efficiency lense that offices have,” Playford said. “So it would be fair to say we’ve got too much air in our warehouses and some of the things that sit in our warehouses in terms of inventory are probably things that shouldn’t sit there.” It is estimated that around 200 of the 700 warehouses occupied by central government will come under the GPA’s management. The portfolio includes a mixture of freehold and leasehold assets. Many of the assets not in the GPA’s control sit within the independent MOD and health estates, but where the departments’ ambitions align with the GPA’s, they there could be scope for more warehouses to come under the agency’s control. Staff at the GPA are currently creating a register of the warehouses, which will be the first central register of their contents. “Some of them have got equipment in that the environmental agency or public transport might use for snow ploughs or for floods; some of them have got a lot of paper in them which people have stored over time for their records; some have got chairs and inventory, desks and things like that,” Playford said. “There’s a lot of good stuff that sits there, but there’s a lot of things that we could organise in a different way. So, the warehouses programme is there to take a strategic look across all the warehousing we’ve got. How can we have a logistics system that is far more based around technology and the need to hold assets? What assets are sitting in there that you don’t need to have? Do you need the complexity of having, throughout the UK for example, items held in every single location or county that you don’t use very often, and would it not be better to centralise some of that?” Private sector talent The agency belongs to the Cabinet Office and must act in line with the interests of John Manzoni, chief executive of the civil service. However, it has its own board, to which it is currently hiring non-executive directors. Mike Parsons, who joined the Government Property Unit from the Home Office in November to oversee the estates strategy, will act as the accounting officer for the GPA for an interim period before a chief executive is hired. New hires, not yet announced, will join the executive team in the next couple of months as part of a drive to bring specialist talent into the team. “One of the principles of setting up the GPA is that we get the best talent and we have a centre of expertise for government on property,” Playford said. “We will continue to do that; either by absorbing good quality people from within government, or indeed making some hires from outside government.”   To send feedback, email louisa.clarence-smith@egi.co.uk, or tweet @louisaclarence or @estatesgazette.