Senior council officers voice doubts over retail investment exposure
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More than half of senior local authority finance officers think councils are overexposed to shopping centre and other retail property investment, according to a Room151 survey.
The Room151 2019 Current Affairs Survey received responses from more than 150 section 151 officers, deputies and other senior finance staff within UK councils.
It found widespread concern about the investment strategies of some councils, with 52% of respondents agreeing that councils are overexposed to retail investments.
This compared to just 17% who said councils were not overexposed to the sector, with 31% saying they didn’t know.
Responding to the survey, Mark Garmon-Jones, director of UK Investment at property consultancy Savills, told Room151 that council investment in their own town centres made sense from a regeneration point of view.
But he also said that this could not be separated from the income-generating benefits of retail investment.
He said: “Shopping centres are often the hub and heart of the town centre.
“As long as councils are well advised, making investments in their own town centres makes sense.”
He said that councils investing in their own retail areas were likely to attract more businesses to occupy units.
“We are finding a lot of retailers saying that investment from councils shows a long-term commitment, and those are the sorts of towns they want to be in.”
A number of high profile failures of high street store chains have prompted fears that councils are putting too many eggs in the retail basket in recent years.
Last year, think tank Centre for Cities said that shops take up twice as much space as offices in struggling town centres, while successful ones have three times as much office space than retail.
A report by economic research firm Capital Economics said that increasing vacancy rates suggest that shopping centres are hardest hit by the current retail downturn, leading to a potential 10% drop in capital value, according to new analysis of the sector.
However, in September, Michael Quicke, chief executive of investment manager CCLA, told delegates at Room151’s Local Authority Treasurers Investment Forum: “We don’t see evidence of local authorities consistently overpaying for assets – sometimes they pay more and sometimes they pay less.
“We don’t see any alarming behaviour going on out there when we are in the market.”
And Garmon-Jones said: “It is important that the effort is put in now to regenerate these shopping centres. In the long term it really pays off and forward-thinking councils will reap the benefits.
“At the end of the day all property sectors are cyclical.”
Rob Whiteman, chief executive of the Chartered Institute of Public Finance and Accountancy, told Room151 that it was important for councils to keep a balanced portfolio of investment types.
