Utilising local authority property assets to develop resilience
In the face of economic uncertainty and evolving community needs, local authorities face unprecedented challenges. Demand for services has increased whilst revenue funding has been constrained, resulting in the need to shift towards innovative solutions that foster collaboration and leverage existing resources effectively.
Property assets, often overlooked, present a unique opportunity for local authorities to alleviate financial strains and develop resilience against future challenges. Sukhy Duggal, Operations Director for Business Advisory at Mace Consult, shares his thoughts on how innovative strategies can transform property assets into a sustainable source of revenue while better addressing the pressing needs of communities.
The traditional methods of generating revenue through property assets, such as sales, disposals, and leaseback arrangements, have long been employed by local authorities (75,000 assets since 2010 according to the IPPR). While these methods still have their place, they often fall short in addressing the scale of the financial challenges faced by councils today. Instead, council leadership must explore new avenues alongside traditional revenue streams to foster long-term sustainability.
Take advantage of fresh collaboration
Tapping into new collaborative partnerships could unlock significant opportunities for local authorities.
One such approach could be to work with the private sector to sell future revenue streams and engage pension fund models. In this way local authorities can attract private and public sector investments that provide much-needed capital for infrastructure projects and community initiatives. There is already significant precedent for this from international as well as UK based pension funds.
The successful collaborations between North American pension funds and European infrastructure and utilities projects exemplify the potential for mutually beneficial partnerships in the global investment landscape. This partnership model not only injects vital capital into a wide range of European projects, from traditional utilities to innovative battery producers, but also signifies a promising avenue for UK local authorities to unlock significant funding opportunities.
By leveraging these kinds of collaborations, councils create opportunities to access the expertise and capital necessary to develop essential infrastructure, enhancing public services for communities across the country. This was amplified by 2023 announcements from the Government for UK pension fund providers to invest in public sector projects, but puts the onus on authorities to build strong relationships with such providers focused on certainty of delivery.
However, councils should also look to public sector partnerships to maximise the potential of property assets. One Public Estate began in 2013 and has supported over 800 projects by providing practical support and funding to councils to deliver ambitious property-focused programmes in collaboration with central government and other public sector partners. By working in partnership with other public sector organisations, including at the service planning stage, local authorities can enhance efficiency and effectiveness, reducing costs and improving service delivery.
Optimise existing assets and estates
Alongside exploring fresh partnerships, authorities would benefit from a thorough examination of their existing buildings and resources. The ability to repurpose public estates to serve multiple functions over time enables councils to optimise existing infrastructure and meet changing community needs.
For instance, can any non-domestic buildings be converted into fresh housing? In doing so authorities not only meet a nationwide demand for more homes but also unlock new revenue streams. Property taxes, leasing agreements or sale proceeds can bolster their municipal finances over the long term. Commercial expertise will be critical to ensure the most appropriate risk managed approach to such investment.
This endeavour requires a careful, managed approach to get right. First, commercial expertise is critical to ensure the most appropriate risk-managed approach to such investment. Failing to put the right financial mechanisms and processes in place can result in poorer returns. Second, energy has to be aimed at structures most likely to support local community needs or initiatives. Stakeholders, including residents, developers, and urban planners, must be consulted with decisions being made in tandem with comprehensive assets assessments to avoid disappointment on the balance sheet and among local communities.
Alongside repurposing assets, councils can see significant benefits from rationalising their estates. This involves strategic planning with placeshaping at its core, examining the role of the local authority within its community.
Some authorities have repurposed depots and warehouses to meet private sector demands, or have even entered into joint ventures with the private sector leisure and entertainment industries for the development of landmark entertainment spots for their communities. In doing so, local authorities can generate ongoing revenue streams while revitalising communities and enhancing public services.
Property assets present valuable opportunities for local authorities to overcome financial challenges and better serve their communities. By embracing innovative strategies, fostering collaboration and adapting to evolving needs, local authorities can unlock the full potential of their property assets and build a more sustainable and resilient future for all.
