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Councils put £4bn on property to save towns
Tom Knowles , Property Correspondent
April 12 2018, 12:01am,
Local councils have spent £3.8 billion buying up office blocks, shopping centres, leisure centres and warehouses over the past five years in an attempt to protect struggling town centres.
A sharp decline in the number of private investors looking for returns by placing their money in the renovation of town centres has led local authorities to step in.
At the same time an ever-greater pressure to deliver services while keeping council taxes low has led local authorities to look for other sources of income.
However, experts have warned that many local authorities are buying up property without a broader masterplan or vision for regeneration, meaning that they are sitting on a “ticking time bomb” if the property bubble bursts. If that happened and a local council then struggled to pay back its loans, it could be forced to cut local services or increase taxes.
Figures compiled by the property consultancy Carter Jonas and Revo, which represents Britain’s £360 billion retail property industry, show that councils invested £3.8 billion in commercial property assets between 2013 and 2017. About £1.7 billion of that was spent on office space; retail accounted for nearly £1.2 billion; £600 million was spent on shopping centres and £400 million on retail parks. The remainder went into warehouses, leisure centres and mixed-use schemes.
Steve Norris, head of regeneration at Carter Jonas, said: “Since the recession the private sector has pulled away from struggling town centres and is a lot more risk-averse. That means local authorities are having to take on a lot more of the risk, by assembling sites or funding regeneration themselves.”
The research said that Spelthorne borough council in Surrey, which contains the towns of Ashford, Shepperton, Staines and Sunbury, was the biggest local authority spender, buying up £477 million of assets in its area. This is more than double its nearest rival, Warrington borough council, which spent £219.5 million; largely because Spelthorne bought BP’s International Centre for Business & Technology in Sunbury for £360 million.
The largest purchase of a retail centre was The Glass Works in Barnsley by Barnsley metropolitan borough council for £120 million, followed by The Mall in Camberley bought by Surrey Heath borough council for £86 million.
Dr Norris said that councils needed a long-term plan for the properties they bought and a vision for how they could deliver long-term benefits.
“In a lot of cases, property comes on the market and there is a knee-jerk reaction by councils to buy it, but they need to think really carefully about why they are doing that,” he said.
“This could be a ticking time bomb. The property market is cyclical, so inevitably there will be a downturn, there is also Brexit looming and we’re not sure what the impact of that will be on the property sector. And the whole retail sector is changing and struggling as retailers pull out of shopping centres rather than look to expand.”