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Dec 14, 2010

Localism Bill - the latest phase in the property market revolution?

Whether you agree with its principles or not, there’s no doubt that the Localism Bill unveiled by Eric Pickles yesterday is another sign that the world we have known is being swept away. Designed to shift the balance of power away from central government towards local government and communities, the bill will transform the structure of the UK, changing the way we own local assets and run local services, it will also have a profound effect on local property markets, both domestic and commercial.

It is however, just part of a wider shift in the UK property market. One of the most significant recent announcements in this regard came earlier in the year from Prime Minister David Cameron with his call that a new form of property vehicles to own and manage the government offices estate should be free to charge departments a ‘market rent’. The intention is to create incentives to use the current public sector estate more efficiently with rents benchmarked against those charged by the private sector.

This is part of an ongoing debate that finds cross party support. The property vehicles were originally announced by the last Government. And the debate about how to make the public sector’s £30 billion property estate more efficient has been ongoing for some time. The Office of Government Commerce (OGC) ignited an initial discussion about the design and management of Government property in 2009. The report it produced recommended that the entire estate should be subject to an overhaul in the way it used space with the ultimate aim of saving around £1.25 billion of the annual £6 billion running cost. Its publication coincided with a heated meeting of the Public Sector Accounts Committee after it was revealed that central Government property was up to 50 per cent less efficient than that of the private sector.

Of course there are some mitigating circumstances for this, not least in the nature of many public sector buildings. But there is a new tone to the debate about efficiency in the commercial property market for both the public and private sector. The ongoing difficult economic conditions are one factor, but so too is a growing awareness of the potential for savings when the correct approach is taken.


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