Cambridgeshire County Council is considering ramping up its spending on commercial property, having acquired an industrial estate and a Tesco site this week.
The council spent £51.4m on a 986-year lease of the Tesco site in Cheddar’s Lane, just off Newmarket Road in Cambridge. It says the deal will generate enough revenue to employ 56 social workers, pay for more than 149,000 hours of home care, or support 80 older people with dementia each year.
The current lease to Tesco has 10.5 years to run, with index linked annual rent increases – which will give the council a 4.5% return on its investment – with expected rises to almost 6% per year by the end of the 10 years.
It has also bought a 10-acre industrial estate in Peterborough for £11.5m, which it says will generate a sufficient annual return to fund the entire countywide trading standards operation.
The return on investment for the site is currently 6%.
Councillor Josh Schumann, chairman of the council’s commercial and investment committee, told EG: “This is not solely about government cuts. We are facing a number of demands and pressures. People are living longer with health concerns and needs, and we have to finance that.”
The council’s first major foray into the commercial property sector came last year, when it bought a 251-bedroom student accommodation block in Cambridge, Brunswick House, for £38m in October.
Schumann said the council would look at whether to increase its commercial property budget this month. “We are starting to look at that now. It is a political decision whether to ramp up our investment, and we are about to set our budget for the year 2021.”
The council is funding the deals by selling plots of land. It owns one of the largest farm estates in the UK, roughly 35,000 acres. Schumann said: “We largely fund the acquisitions through selling parcels in that land. We are ramping that up as the housing need is so great in this country.”
Meanwhile, Portsmouth Council has appointed Avison Young to manage its 120-acre office campus which it purchased last week for £138m – representing the largest property deal by a UK local authority so far this year, according to Radius Data Exchange.
The site comprises circa 595,000 sq ft of offices and 8.7 acres of development land.
The council has planning to build at least 25,000 sq ft of new offices on demand. The council is already talking to Land Rover and Jaguar about building new showrooms.
It is also looking to build new office complexes for national occupiers who may want to relocate into the regions.
A Portsmouth City Council spokesperson said: “The council is focused on managing the Lakeside business campus and its existing office space. Any future development opportunities on the wider estate will be reviewed in due course.”
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