We can’t afford to give lazy assets a free ride
In the continuing aftermath of the Corporate Spending Review (CSR), pressure is mounting for a number of publicly-owned assets across the region to deliver on their potential.
Without legal commitments to develop, a significant number of sites remain unused. This comes at a time when public sector capacity to proactively manage assets has been squeezed and resources to progress projects is limited. As local authorities look to further modernise with co location of back office functions with other public sector partners and reduced staffing, the importance of strategic asset reviews, including operational property, has never been higher.
In many ways, the excess of public property lying dormant has been inevitable as development on these sites has always suffered from long lead-in times and the need to secure assets in advance.
Cuts in specific regeneration cash coupled with reduced staff resources means the problem is continuing in this sector.
So what is the solution?
Public bodies need to see this as an opportunity to develop stronger ties with the private sector. Whilst their ability to pump prime developments is more limited they still own significant property assets.
Some developments can still stand alone and will go-ahead despite the current market, for example, the redevelopment of Wm Morrisons supermarket in Blyth which Sanderson Weatherall has been supporting through site assembly.
Other schemes such as the Stephenson Quarter in Newcastle have strong and innovative support from the public sector and the ability of a well conceived project of this nature to progress to the development stage will be an interesting litmus test for future projects.
There are however a number of schemes in less attractive locations at an earlier stage of development and the public sector needs to be more creative. This includes consideration of the packaging of assets into new structures such as Asset Backed Vehicles (ABVs).
These can be used to potentially secure investment / development partners and share risk to free up private sector investment. The public sector take a longer term view on financial returns and partners will take a long term view building value in the portfolio over time. In this difficult period in the market the due diligence and market testing required for ABV’s can be progressed in readiness for the recovery.
This type of structure certainly merits further consideration in the current market, although it will not be a one size fits all solution for the sector.
The asset backed approach, strategic asset management and changes from a shrinking and modernizing public sector can potentially overlap with regeneration aspirations. If regeneration becomes a focus for ABV’s this will become an ever more complicated and innovative area with public sector occupation being a valuable tool to unlocking private sector development finance.
The key to success lies in understanding both sectors requirements and choosing the correct delivery structure to allow the aspirations of both to flourish.
Simon Elliot, Associate Partner for Public Sector Consultancy, for and on behalf of Sanderson Weatherall LLP