Local authorities are emerging as key investors in the UK property market, last year making up around 3.5% of investments compared to much lower figures previously, writes Kevin White, partner at Montagu Evans.
Already just over half of investment by councils is within their own boroughs, driven not just by a need to replace the 60p in the pound cut in central government funding, but also to take a stake in their local economies. Central to their vision is delivering longer term placemaking and improved public realm, with a greater level of control of retail repurposing in order to create the town centres of the future that their community will support. Despite recent headlines about major out-of-borough investments, it’s this in-borough regeneration-led investment trend we expect to increase.
Compared to other owners of assets, local authorities have different drivers which require a local agenda for their investment strategy. They can more readily take a longer term approach, calculate returns based on not just financial IRRs, and achieve “value-add” through job creation, new homes bonuses and business rates retention.
Their concerns and controls are wide-reaching and their commitment to driving regeneration and other improvements is increasingly important as many town centres continue to struggle. In many ways they could even be seen as the new generation of landed estates, with decisions rooted very clearly in a particular community that they understand at every level.
And it can work very well indeed. In Ashford, Kent, the local authority has a clear strategy for the town. Key development partners including Quinn Estates and U+I are buying into the long-term approach that has improved the town over recent years, exploiting its location and opportunities to find value and proving attractive for inward investment. As a result, winemaker Chapel Down is currently constructing a new state-of-the-art brewery in the heart of the town and the Macarthur Glen designer outlet is creating a major new extension.
Local authorities also bring an in-depth understanding of customers, their constituents, and have knowledge and connections that can spot and exploit opportunities in a different way. As the traditional model for shopping centres changes, this knowledge and potential for collaboration could bring a new dimension to future plans for property assets in urban centres.
Indeed, major owners of town centres, no matter their pressure to sell, are now seeing collaboration as key to delivering investment over the next few years. There is great benefit in creating value from longer term place shaping, where investment is directed towards making the town centre sustainable by addressing purpose rather than hiding behind cosmetic changes.
The most advanced councils are moving towards a clearer view of how to make more of their real estate assets in line with their town vision. They are already thinking about risk and appropriateness, cross-party support beyond the short term, and a clear plan for investment and asset management that is revisited regularly. Strong treasury management and the right resources play a part too, as does transparency of strategy, performance and process. All points that are an important focus going into the Government Property and Local Government Association conferences this week as we discuss how to take control of town centres. Montagu Evans will be leading on discussions at these two conferences, linking together the Future High Streets Fund, councils, town centre owners and the community.
With everyone in the industry thinking differently about retail, there is a growing opportunity to partner with councils to deliver town centre, housing and employment-led regeneration, with a long term view and very tangible community and social benefits.
