Supporting local authorities as they continue to invest in the physical fabric of their towns and cities

Supporting local authorities as they continue to invest in the physical fabric of their towns and cities

By Dr Steve Norris, Head of Regeneration at Carter Jonas, and Ed Cooke, Chief Executive of Revo

Local authorities have identified an opportunity. By purchasing commercial property assets, there is a chance to fix struggling town centres while generating attractive long-term income streams at a time when local government funding is being curtailed. The trend has mushroomed over the last five years (to 2017 year-end) with local authorities spending around £3.8 billion on acquisitions.

We uncovered the scale of this investment as part of our joint study to identify solutions for fixing the UK’s town centres. Of the £3.8bn invested in commercial property assets, nearly half was spent on the acquisition of office space. Retail accounted for nearly £1.2bn of spend with shopping centres (£600m) and retail warehouses (£400m) the most popular assets. The remaining investment was split between industrial property (£500m), mixed-use schemes (£100m) and leisure assets (£80m) with a small amount diverted to alternatives use classes.

The impetus for this level of investment can be attributed to the availability of affordable credit. Local authorities are now able to borrow money cheaply from the Public Works Loan Board and other sources to fund acquisitions and associated development works. Loans can be paid back over a longer period allowing the local authority to generate income over time.

Spelthorne Borough Council in Surrey, which contains the towns of Ashford, Shepperton, Staines and Sunbury, emerged as the biggest local authority investor committing an estimated £477.1m to assets across the country. This is more than double its nearest rival Warrington Borough Council (£219.5m) and is largely down to the purchase of BP’s International Centre for Business & Technology in Sunbury for £360m.

Some local authorities have used this money to make pure investments plays – even investing outside of their own borough or county in more than a few cases. This generated widespread criticism and the Government took steps in the last Budget to curb the use of council borrowing to invest in income generating property assets outside of local authority’s immediate domain. The Local Authority Investment Code has been amended and the guidelines now state that “borrowing solely to invest in a yield bearing opportunity is borrowing in advance of need”. However, it is worth noting that this does not prevent local authorities from investing their own capital receipts.

Over the last 18 months, Carter Jonas has invested over £100m on behalf of Local Authorities in commercial property and developed strategies to help them achieve their long-term goals for income return or regeneration. This includes creating diverse portfolios across a wide range of sectors and proactive asset management to maintain and increase returns. Yet, our experience of working closely with local authorities to help them identify and maximise assets has taught us that acquisitions are fundamentally born out of a deep desire to protect and improve their local area.

The challenges facing the UK’s town centres and high streets are well documented, but as part of our study to work out what could be put in place to halt the decline we surveyed members of the public and private sector – including local authorities, investors and developers – to ascertain what they viewed as the biggest threats. Competition from online shopping and the impact it has had on changing consumer habits was identified by 28.4% of respondents as the biggest challenge for the UK’s high street over the next five years. Business rates (13.6%) and reduced demand for space from retailers (13.6%) were also singled out.

Married with the impact of the last recession, it is the lower to mid-range high streets that have been hardest hit by these pressures. The vacant frontages and gaps on the high street do not help the image of the town and serves to further encourage local residents to go elsewhere. As the private sector continues to withdraw from the market and becomes more risk averse, it is up to local authorities to take the lead and play a more active role in reshaping their urban environment to ensure they remain at the heart of each community.

Some of these town centres have all the attributes to be successful once again. In Nuneaton, for example, Carter Jonas is advising the County Council and local authority on the regeneration of the town centre by promoting new high quality mixed use development to make it a more viable and attractive place to live, work, shop and visit for a range of activities and uses. The North Warwickshire town has a number of competitive advantages, particularly its good infrastructure – it is just one hour from London and close to Leicester and Birmingham – meaning it has the real potential to be a thriving commuter town. 

There is no “one size fits all” to successful regeneration and place-making. It requires a sound and well-evidenced vision, masterplan and/or development framework to provide a route map to ensure the investment and development potential is fully realised and delivers long term social and economic benefits. Creating an attractive place is key to this and some 53% of respondents to our research confirmed that improvements to and investment in the public realm is vital to delivering town centre regeneration and major development projects. Nearly half of respondents also agreed that strengthening local and national town centre first policies and reducing business rates were important considerations.

Selecting the right development partners is an important piece of the puzzle. The right advisors can guide local authorities through the process avoiding potential pitfalls to deliver a finished product that is not only viable, but a catalyst for further regeneration. The Government’s Future High Street Forum, which was established in 2012, identified that fragmented ownership and a lack of co-ordination amongst stakeholders is a major obstacle to town centre reinvention.

Whilst the intervention from the public sector is necessary to spur on regeneration, the pace of change in the market – particularly in the retail sector – means that local authorities should draw on the expertise and resource available in the private sector to manage and re-position these assets. Our research reveals that over 66% of respondents still see joint venture partnerships as the preferred delivery models for regeneration projects, so we hope to ignite fresh dialogue between the public and private sector to unlock new opportunities. As a result, the future success of the UK’s urban environments relies on better collaboration between the public and private sectors and Carter Jonas and Revo will continue to play lead roles in bringing the two together.

The acquisition of commercial property assets is just one example of a number of initiatives that local authorities can consider to unlock the potential of property and land. We also expect to see more councils focusing on their own operational service property portfolios. These complementary strategies have property at the front and centre with authorities assessing how they own, occupy and invest in the built environment, as well as the role the environment can play in shaping a region’s future growth.

The Carter Jonas and Revo findings are the first phase of a comprehensive study that will be released in Autumn 2018. This subject will be debated at Revo’s annual conference in Manchester in September 2018, with further workshops scheduled throughout the month in Leeds and London. 

If you would like to be involved in this study, or for further information, please contact [email protected] or [email protected].

NB This article appeard in the latest ACES Terrier Magazine

Gary Stodart

Director at TGP Landscape Architects

6 年

Great article makes sense and well overdue. This issue has been a massive stumbling block for town centre re-design and public realm improvements. This will assist local authorities to make new masterplan proposals more achievable on the ground and breathe new life into towns.

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