Public sector occupiers are set to leave central London in droves over the next parliament thanks to new rules set out by the chancellor.
Plans to charge government departments market rents for space in publicly owned freehold buildings will accelerate the move out of expensive central locations, according to head of the Government Property Unit Bruce Mann.
The new regime will be managed by a central agency under the control of the GPU.
Mann said the policy would be cost-neutral in the first year, with departments currently occupying freehold space allocated additional funds to meet the cost of rent in their first year.
However, with further spending cuts expected in the next parliament and annual reviews of the funds allocated for rent, Mann said the policy would help encourage departments to vacate all but the most essential space in high-value locations.
“We have been encouraging departments to [decentralise] anyway,” Mann said. “This will really accelerate it.”
The GPU’s latest State of the Estate report shows the government has vacated an average of one building per day since 2010, generating £1.4bn in capital receipts and saving £625m.
Mann said it was now aiming to reduce the total central London portfolio to just 20 buildings, down from around 70 at the start of this parliament.
Departments exiting expensive locations will be grouped together to maximise “purchasing power” and create new public sector hubs in fringe locations such as Croydon or Stratford.
jack.sidders@estatesgazette.com
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