Is it just me or have we been transported back to the 1970s? It’s not just the relentless strike action, growing militancy among the masses or shifting political landscape (in which left is left and right is increasingly right); it’s the councils too.
After decades being under the cosh, they suddenly seem to have found their voice again - and it is already starting to resonate loudly across the property industry.
As we reveal, Land Securities has backed down on its plans for a retail park anchored by John Lewis in Worcester in the face of opposition from the council, making Worcester the first place to have said ‘no’ to the mighty department store chain. Its message to Land Secs was clear: ‘This scheme would destroy our high street, so amend your plans or forget about it.’ (Cue a rethink by a suitably chastened property company).
Elsewhere in the country, councils have been taking on the property industry in a different way - by competing with it for investment assets.
In the past year or so alone, local authorities have increased the amount invested in property exponentially from 0.2% to 2.76% of the overall UK market.
That may not sound like a huge amount of the overall pie, but think about what sort of share they could have this time next year if they keep up that ferocious rate of investment - and the signs are that they will.
As Mayfair Capital’s William Hill notes in his comment piece, local authorities currently see property as “a slam dunk” because they can borrow up to 100% of their purchase at an interest rate as close as you can get to a government gilt - and then pocket the difference between that and the income return from the investment.
Actually, with your average property investor unlikely to be able to access money anywhere near as cheaply, local authorities could well up the current pace, potentially distorting the market.
Necessity sparks invention
What’s driving this sudden surge of interest? As ever, necessity is the mother of invention. Councils have been forced to look for fresh revenue streams to plug ever-growing funding gaps and so great is their need and spending power that they are increasingly prepared to look beyond the tried-and-tested retail sector.
In short, don’t be surprised if you find yourself going head to head with a council when you’re trying to buy an office, industrial or leisure scheme this year and not just for the small stuff either - last year, Spelthorne District Council coughed up a whopping £360m for BP’s business and technology campus in what was the biggest ever commercial investment by a local authority in the UK.
New year, new look
If the councils can change things up for 2017, Property Week can too. While I’m a firm believer in the old adage of if it ain’t broke, don’t fix it, my nickname isn’t ‘Tinkerman’ Ranieri for nothing.
This week, we are proud to unveil our new-look ‘news & analysis’ and ‘insight’ sections and share the views of the first of our new regional panels in our ‘markets’ section. Small changes perhaps, but we think they make a big difference. Hope you agree…
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