Public sector cuts present threat to regional offices

  The UK’s regional office markets are expected to suffer as the new Conservative-Liberal Democrat coalition embarks on its plan for an immediate £6bn cut in public spending.   Claire Higgins, head of research for Knight Frank, said: “The more visible and direct impact on commercial property will be the way the public sector is treated. This will hit those regions most dependent on the public sector – not just office space demand, but entire local economies.”   The public sector was involved in 45% of all office transactions over 50,000 sq ft in the regions last year, compared with only 11% in London and the South East, KF said.   Across the UK, the public sector accounts for 30% of full-time employment, compared with just over 20% in London.   However, Ian Ellis, executive chairman of government property outsourcing specialist Telereal Trillium, said that the coalition’s accelerated plans to tackle the country’s £890bn structural deficit over five years would also open opportunities for the property sector.   “We see a real opportunity for estate rationalisation to reduce property costs and unlock value, while enhancing the quality of public buildings and supporting improved front-line public services,” he said. “Having a stable coalition will facilitate a concerted drive to make this happen.”   In Scotland, which has a high exposure to the public sector, Jones Lang LaSalle’s managing director, Alasdair Humphery, said that there were concerns about the effect of spending cuts on the construction and building industry.   He said: “There is a real chance that those governments departments that may be planning an office move will be stopped.”   patrick.clift@estatesgazette.com