What should we do with our surplus property?


By Dave Ayre, CIPFA Property Networks Manager

The Chancellor faces some tough choices in the run-up to his Spring Statement. Does he borrow more to cushion households from the cost of living crisis, fuelled by the increase in demand as the world recovers from COVID-19, and further exacerbated by the war in Ukraine and sanctions imposed on Russia? Or does he simply allow household budgets to be squeezed? Either way, we can expect further pressure placed on public sector budgets.

One of the impacts of the pandemic has been the revolution in new ways of working. Asset managers have been struggling for years to make the most efficient use of their property estate, and have suddenly seen a transformation in hybrid and home working. Where we go from here will determine whether asset managers can contribute to "building back better and greener," and make savings to protect frontline services. Previous scepticism from managers that staff cannot be trusted to work from home has all but evaporated, with the majority of employees valuing the improvements in work-life balance. This has prompted employers across public and private sectors to carry out a fundamental review of their accommodation.

This brings a dilemma for the public sector: should we follow the Cabinet Office's lead, which has tasked the civil service with ensuring their offices can return quickly to full occupancy following the lifting of restrictions in England? Or is this a missed opportunity to consolidate and build upon the new ways of working, and use surplus assets to generate capital and/or revenue income and contribute to the regeneration of town centres and building more homes?

The rationale of central government, and any local authorities wishing to emulate their approach, is the understandable concern that a dramatic lessening in office workers from our town centres will permanently damage their economies as shops, restaurants and coffee shops see an ongoing reduction in footfall and turnover. The simple solution would be to instruct everyone to return to the office. 

There may be a broader benefit to the economy from hybrid working, however. The drop in economic productivity since the 2008 financial crisis is well documented, and the UK has failed to keep up with its major G7 competitors. Traditionally, productivity increases are crucial for economic growth, and shape the living standards of workers. While the reality is more complex and wage growth has stopped tracking productivity growth, an ongoing downturn in productivity forces us to confront important questions about how our economy operates and where a rise in living standards will come from. The government's solution is to invest modest funds into research and development, which are significantly below our competitors, and set up freeports, which critics have argued are mere tax havens that will move jobs from one part of the country to the other. 

What has this got to do with new ways of working? There is growing evidence they increase productivity. If new, well-designed hybrid and home working methods that learn from best practice are deployed across the economy, it could make a significant difference to stubbornly low levels of productivity. If the government's fixation on turning the clock back to pre-pandemic working methods for the civil service is mirrored by the rest of the public sector, we risk growing the existing productivity gap between the UK and its competitors, as well as between public and private sectors.

Many local authorities are already developing solutions to embed new ways of working into their operating culture, using surplus property to drive developments which provide social and economic value to their communities. The management of surplus property on a larger scale will be a growing challenge for asset managers, but the need for greater revenue savings and the maximisation of capital receipts to repay debt or invest in low carbon green growth has never been greater. 

How do we decide whether property should be retained, reused, or declared surplus? And how does a decision to declare property surplus for disposal affect it’s valuation on the balance sheet? How should the growing list of surplus properties be managed? What happens to it while it is vacant and what should our disposal strategy be to maximise capital receipts, revenue savings, social and economic value?

Find out more

  • These issues and more will be discussed in a webinar, 'Managing surplus property', on Wednesday 27 April 2022 — book your place

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