New ‘PropCo’ heralds spiralling Whitehall rents
The UK government is putting all of its departments’ properties into a new property agency, with the aims of improving estate management and encouraging departments to release expensive central London properties, civil service chief executive John Manzoni has told Global Government Forum. “Right now, a building in a department’s balance sheet is just an asset – it’s not costing anything,” he said. “We do need to create the right financial incentive for departments to think of more creative ways of getting out of some half-empty buildings.”
November’s Comprehensive Spending Review announced that the government is “centralising ownership of the estate and charging departments market level rents for freehold assets they currently own,” with the first properties transferring early in 2017 and a target of moving “all relevant central government land and property” into the new central body by 2020. The first assets to be transferred, it added, “will include freehold office, warehouse, storage and depot properties” – raising the prospect that departments might soon find their own Whitehall HQs unaffordable.
Speaking in an exclusive interview, Manzoni explained that the reforms have two aims. “We have an awful lot of estate all over the place, and we would manage it, run it better, if we had real capability in one place and built a critical mass of real property management capability,” he said. “So the ‘PropCo’ is a way of building world-class property leadership, managing our estate, managing the contractual interfaces around it, spotting opportunities for value and managing it as a portfolio.”
Second, he said, the aim is to put properties “at market value on the balance sheet, and then create a financial incentive that if [departments] get out, it’s good for them… I think that’s of huge benefit because there’s an awful lot of value in there to release.” Manzoni cited the Household Cavalry Barracks at Hyde Park – which sits on some of the most expensive land in the world – and noted that whilst it’s a “jolly nice place for horses”, the barracks are worth “an awful lot of money.”
Most of the buildings on Whitehall – which runs between Parliament Square and Trafalgar Square – are occupied by government departments, many of which have owned them for decades or centuries. Previous attempts to encourage or push departments into relocating staff into cheaper offices outside central London have had little impact; but if the government enacts its plan, huge hikes in their office costs would leave them with little option.