The stage is set for local authorities to move new town centre schemes forward in a far more proactive way than they have done for decades.
A number of political and socio-economic factors are combining to encourage councils to reappraise their traditional approach to development, creating potential new opportunities to free up assets and generate income in these cash-strapped times.
Woking (pictured), Croydon and Bournemouth are among those councils that have adopted a more proactive strategy to extract value from local authority-owned property, and others are sure to follow. The drivers behind this approach include:
- the deficit reduction
- a shift in emphasis to area-wide regeneration and asset management
- increasing public sector collaboration through Total Place and community involvement through the Localism agenda
- new models of delivery including Local Asset Backed Vehicles
- less reliance on private sector developers
A recent tendency has been the use of development agreements to move schemes forward, but this offered no guarantee or development of uneconomic sites. This has been compounded in recent times by limited appetite and funds for speculative development, as evidenced by stalled projects throughout the UK.
Now, however, there is a growing recognition that the public sector can take a more active role in development and does not need to abdicate all responsibility through a development agreement to make a project happen. It can manage risk whilst drawing on the support of specialist ‘regeneration’ private sector operators who have the skills to work with local authorities over a long term to achieve multiple outcomes.
Such outside expertise may become more important as public sector resources dwindle and it reflects a shift towards longer term partnering rather than expensive and multiple procurements.
A major opportunity for local authorities lies in their shopping centres, many of which were historically built on local authority land where the council granted a geared ground rent to the developer. A large number of these centres are tired and are peppered with relatively small shops no longer favoured by multiple retailers.
Active asset management, including reconfiguration of shops and leases to create larger units, could stimulate development further down the line while improving the centre’s revenue stream. Similarly, many councils are sitting on freehold or long leasehold shopping centres with latent investment potential that could be unlocked. Other local authority-owned land, such as surface car parks, could be incorporated into a masterplan or development programme to improve the vitality and viability of the town centre.
Furthermore, the consolidation of public sector property under the Total Place initiative could provide a catalyst and opportunity for new development, such as a library, market or one-stop shop.
Other structural changes are streamlining the opportunity for development. Typically, many public sector bodies, including local authorities, RDAs and the HCA are often involved in the decision-making process - making projects difficult to deliver. That route is now potentially more straightforward. A longer term, more strategic and joined-up approach to development led by local authorities may create a greater distinction between financial and socio-economic measures such as job creation.
Supermarkets, with their relatively high employment, may find they are pushing against more of an open door in seeking planning consents. The reduction in local authority staffing to meet the deficit reduction, meanwhile, may provide the catalyst to revise and separate property and asset management responsibilities, through outsourcing and corporate partnerships.
A shortage of revenue may also act as a positive catalyst for change. With few performance measures in place, net revenue received from property by local authorities is often not known or may be at risk due to poor property/asset management. New models are being pursued to provide certain income and/or capital to the local authority, which then shares the uplift in rents with a private sector partner who takes over the property/asset management roles and responsibility for investing capital.
Finally, the accent on localism paves the way for the community transfer of certain non-operational properties and functions such as the maintenance of the public realm in a town centre – an essential part of the town’s brand.
Stuart Knight, head of local government at King Sturge