Ellandi director and Revo vice president Mark Robinson led a session on the growing importance of local authorities as investors, on top of all their existing roles that affect shopping centres.
Robinson pointed out that in 2016 local authorities bought £1bn of commercial property, of which £400m was spent on shopping centres. “Taking the mega-deals out of the equation, local authorities accounted for half of the shopping centre investment market,” he said.
Kevin Parkes, executive director at Middlesbrough Council, explained why there had been this sudden surge. “Changes in local government finance mean that from 2020/21 we’ll have to generate out own funding. Commercial rents are an income stream that can support services like social care.” And he noted that the dynamic between centres and councils is changing, as more local authorities become investors. “The relationship between centres and councils has not always been positive,” he said. “But the shopping centre industry needs to do more to ‘sell’ what it does to local authority finance directors because at the moment all they’re hearing are all the negative stories around retail.”
So what can landlords do to engage more productively with the public sector? Angus Stenhouse, retail portfolio manager at Standard Life Investments, advised: “Patience and understanding are required when building long-term relationships with a local authority.” As an example he pointed to Lincoln, where Standard Life worked with the city for seven years before they reached the stage that they could bring the St Marks redevelopment forward.
Panellist Andrew Dudley, Land Securities’ head of retail development, said local authorities have had to become more realistic in their expectations of what new town centre developments can deliver. “Trying to build in experience, flexibility and a mix of uses into a scheme means costs are higher and viability is tighter,” he said. That means there’s less available for the civic facilities like theatres, libraries and bus stations that used to be a common part of the retail regeneration template.
Land Securities’ Westgate scheme in Oxford is a case in point,. “A fellow REIT tried for many years before it was recognised that the ‘add-ons’ made it unviable, and Land Securities was able to take a revised scheme forward,” he said.
All four panellists agreed that it is the centre manager who has the key role to play in building relationships with the local authority. “The centre manager is our representative in the town and their relationship with the local authority is a key function,” said Standard Life’s Stenhouse.
Parkes called for the centre manager’s role to be widened. “It’s critically important that power is devolved to the centre managers so they can make decisions. The government talks a lot about devolution to a local level. The private sector should be looking at doing the same.”