Growing trend for public sector in property investment

Extremely advantageous financial options available

4 May 2017

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Investment Director, Graham Davies looks at the increasing challenges councils face in providing services against reduced government funding. Many local authorities are looking at creative ways of balancing their books and becoming players in the investment market.

Across the UK councils and local authorities have become active in the property investment market. Their reasons for purchasing property can vary from the need to kick-start regeneration, to generating revene to help plug their challenging funding gaps. They also invest in local projects that aim to create or promote social and economic benefit to communities.

The simple economics of property investment look attractive to councils and local authorities, providing a source of revenue income that can be used to deliver statutory services. Extremely low interest rates on borrowing make the maths even more appealing and many authorities across England have made commercial investments. Spelthorne District Council’s £360m purchase of BP’s business and technology campus is just one example of some of the major transactions that have lifted local authorities into the top tier of active buyers in the UK commercial property market.

Across Wales, authorities have been less entrepreneurial in terms of direct property investment activity than their English counterparts. Yes, the likes of Cardiff Council have been very proactive in facilitating regeneration projects such as Central Square, but we have yet to see the purchase of significant commercial investments on the scale of England. Warrington Borough Council has gone so far as to create a dedicated management and investment vehicle to manage its commercial property activity: Warrington & Co. Over and above reinvesting in and regenerating Warrington town centre, direct commercial investments have been purchased to generate revenue.

Will we see increasing levels of property investment amongst local authorities in Wales exploiting the extremely advantageous financial options available to them? Will we see county councils become major players in the commercial property investment market? We shall see.

Blake Morgan committed to 29,000 sq ft office in the exciting Central Square development. We retained Ben Bolton and his team some time ago to advise and appraise options in the lead up to this significant move of our Cardiff Office. The business is extremely pleased with the outcome and Ben's negotiations and attention to detail was a major part to this.

Philip Jardine, Blake Morgan LLP