State property revolution on the way – Telegraph
Ahead of Wednesday’s news on the government’s Comprehensive Spending Review, The Telegraph today reports on the prospect for redevelopment opportunities in London from the government’s plan to increase the efficiency of its property portfolio. However, in the regions things are more gloomy, the paper says, quoting Cushman & Wakefield’s Matthew Stone as saying that “if the government is the predominant occupier in a region and effectively dumps space, it is going to decimate rental values.”
The Office of Government Commerce’s (OGC) State of the Estate report shows that, as of the end of 2009, the government occupied 115m sq ft of offices, with around 35% in London and the South East and 12.5% in the North West. About 38% of the office space is owned, 33% is held through the Private Finance Initiative (PFI) and 29% is rented. The cost of running the estate is £3.47bn a year and the property assets owned by the state are worth £350bn, the paper notes.
The Telegraph says there is talk among property sources that some retailers are already rethinking moves to areas where the public sector is prominent, point out that the government accounts for as much as 40% of office demand in Newcastle compared with 5% in Central London. It also says the “state property revolution” could exacerbate the growing polarisation between prime and secondary assets, and between London and the rest of the UK. It quotes a paper from GVA Grimley, which says: “The types and locations of sites that become available will not appeal to private-sector investors and increased supply relative to weak demand will push asset prices even lower.”
