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Councils are being supported to decide whether to focus property investments within or beyond their boundaries

Just to the north of Warrington, a stone's throw from the M6 and M62 motorways, sits Birchwood Park. The site provides over a million square feet of office and warehouse space to 165 companies and, since 2017, it's been owned by Warrington BC.

The acquisition was the largest of its kind ever by the council, taking 12 months to complete and costing £212m. And, indirectly, it's become central to the provision of local services.

“Last year the net income ploughed back into frontline services from Birchwood Park was £4.5m,” said Arthur Pritchard, estates and valuation manager at the council. “So far it's performing better than the business plan. Obviously we don't expect that to last forever – there will be hard times – but generally speaking it's been a good news story for the council.”

Mr Pritchard was speaking at an event that explored property investment for local authorities. Organised by Public Sector Plc – which creates legal partnerships with the public sector to manage specific property projects – the session brought together representatives from a number of councils. And high on the agenda was how to secure returns via property investment while acting in a way deemed appropriate for a public sector organisation representing a specific area.

“Undoubtedly Birchwood Park's location had significance and had a bearing on the decision [to acquire it],” Mr Pritchard said.

'Public Sector Plc prioritises the need for building relationships, trust and transparency between the different cultures of public and private sectors as an essential pre-requisite to balancing commercialism with the needs of local communities'

Adam Cunnington, chief executive, Public Sector Plc

“In terms of how we operate it, we operate it purely for financial return. We highlighted in our risk register the potential for compromising our management of the park because it's within Warrington and because it's of such significance. But the council's focus has always remained on making decisions that are financially based or return-based.”

This got to the crux of one of the main controversies about councils' decisions to invest in property: whether, in the search for income generation, it is appropriate to acquire properties that sit outside their boundaries.

In late 2017, LGC research demonstrated that more than a third of councils actively investing in revenue-raising property since 2010 now own land or buildings beyond their boundaries.

It is a matter that provokes mixed sentiments. During a group discussion, Public Sector Plc chief operating officer Paul Brown reported that when it came to investment opportunities, the preference from council officers around the table “was to stay inside the borough, wherever possible”.

“It's very difficult from a political perspective to get that buy-in to go outside,” he said. “I think that's something we're finding elsewhere, where councils want to invest but the message you get from members is no, we need to keep the investment within borough.

“I don't think it's stopping people looking beyond the boundary, but whether you actually get approval beyond that is a different question.”

In Warrington, of the 12 investment acquisitions since 2016, four have been out of borough. All are close by, however, in Manchester, Widnes, Farnworth and Hulme.

“Our investment strategy from a property perspective has focused on Warrington,” said Mr Pritchard. “We’ve stretched it to the north-west, using the LEP [local enterprise partnership] as a sort of guide.”

The LEP has also proved helpful at Birchwood Park, where the council is now embarking on speculative development of a further 35 hectares of the site. “The area of the park is within the Cheshire Science Corridor Enterprise Zone,” Mr Pritchard said. “So some of the risks associated with that speculative development have been offset by the LEP who've agreed to underwrite the financial risk for the first three years.”

Reluctance remains at the prospect of moving much further geographically in the hunt for revenue-raising property. But in the interests of the robustness of the portfolio then we need to be looking further afield, argued Mr Pritchard.

“If the council were minded to continue the investment programme, then we’d be recommending strongly that we need to look further afield to promote investment portfolio diversity.”

It is a dilemma with which many officers will sympathise.

 

https://www.lgcplus.com/services/regeneration-and-planning/overcoming-the-property-dilemma-10-10-2019/

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