Camden Council is becoming a landlord to technology start-ups by creating a “knowledge hub” at its town hall.
Plans to refurbish the Grade II listed building using funds generated from renting space to businesses, including those in life sciences.
The move is part of a growing trend of local authorities behaving more commercially with their property portfolios in the face of government cuts.
As well as reducing running costs and improving energy efficiency, Camden’s refurbishment will provide a 9,600 sq ft start-up incubator and 31,000 sq ft of offices.
Theo Blackwell, cabinet member for finance, technology and growth, said the council wanted the town hall to be an attractive base for tech, creative and life sciences companies to grow, owing to its location in the Knowledge Quarter by Kings Cross, N1.
Commercial income from the space will be welcome as the council faces a £171m cut to its budget by 2018/19.
Over the past few years councils have been increasingly investing in real estate to provide new income in an age of austerity.
In south London, Croydon Council has used one of its buildings – Davis House – for the TMRW tech hub, while Lambeth Council’s old town hall has been transformed into Impact Hub Brixton, providing office space for budding entrepreneurs.
Stephen Armitage, director of real estate advisory – public sector, at Lambert Smith Hampton, which is advising Camden Council, said local authorities were thinking about how to make their assets more commercially viable.
“Since the crash local authorities have been under pressure to reduce costs and enhance revenues.
“At first, one of the ways they looked at, that did not prejudice their services delivery, is their own administrative estates,” he said.
“If they have a democratic headquarters they have to create value from somewhere, maybe they don’t need the amount of space they did previously.”
Camden’s Blackwell added: “The rental revenue pays for the £35m-£45m refurbishment project. We will start with this but want to make sure we are catering to the business demands of the area.”
The council is also generating revenue through leasing the roofs on around 30 of its council blocks to WiFi and mobile phone operators to install masts, from which it hopes to generate up to £900,000 a year.
LSH advises 22 London local authorities on how to generate income from their estates.
GPU One Public Estate
Local authorities in England hold more than £60bn of property not used for schools or housing.
Councils have already sold £10.6bn of land and property between 2010 and 2015 and the Office for Budget Responsibility estimates local authority capital receipts could be £11.2bn between 2015 and 2020.
The One Public Estate initiative, a partnership between the LGA and the Government Property Unit, helps councils to rationalise their estates, organising land shares with public sector partners.
However, where local authorities need to generate a higher commercial value on a surplus asset, sharing with another public sector department does not return enough income, and more commercial options are explored.
Barriers to profit
As public bodies, councils must put profits back into core council services, though they can form joint ventures with private companies for development projects.
Theo Blackwell, cabinet member for finance, technology and growth at Camden Council, said: “If you were to raise revenue on housing land, Camden has a lot of garages for example, then the money would go to the pot for council housing.”
Stephen Amitage, director of real estate advisory – public sector, at Lambert Smith Hampton, added: “The proposition that is presented by the public sector must be commercially viable, deliverable and with a political commitment to it – that is the only way the private sector will look at it.”
Commercial thinking
Croydon’s Brick by Brick scheme is a private independent company with the council as sole shareholder that aims to deliver housing. It currently has 1,500 homes in planning.
Colm Lacey, development director at Brick by Brick, said councils needed to be more commercial in their behaviour, pointing to government cuts to Croydon’s budget of 46% since 2011.
He said: “The company purchases land from the council, and applies for development funding, so
the council reaps any development profit which can go back into services. We can deliver over twice as much affordable housing than five years ago.”
Manchester, Ealing, Birmingham, Runnymede and Newham councils also run property companies.
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