Councils urged to make property assets work harder

OVERSTRETCHED councils looking to make ends meet are being advised to assess their property portfolios to help pay for vital services.

With the spectre of more cuts looming, local authorities will have to make all their assets work much harder in order to balance the books, according to Adam Rock, partner at property consultancy Bruton Knowles in Birmingham.

Birmingham City Council, the UK’s largest authority, needs to make £117m of savings this year, rising to £338m by 2017/18. To do so, the council has already sold off a number of its property assets, including the NEC and Louisa Ryland House, as well as offloading a number of car parks, surplus land and offices.

It has also been linked with the sale of the Hilton Birmingham Metropole and Crowne Plaza hotels at the NEC and the new Grand Central shopping centre, part of the £600m New Street Gateway development, has also been put up for sale by the council.

Rock said: “With councils under increasing pressure to make cuts and the purse strings tightening, the stark truth is that councils that have valuable property portfolios need to make their assets work harder for them.

“For example, if a particular function could be located in one place rather than two, then that releases an asset for potential rental, development or sale.”

As well as the threat of further budget cuts Rock said councils are having to deal with the increasingly complex and technical crossover between traditional accountancy and valuation functions, which has caused some tension with audit scrutiny in satisfying the International Finance Reporting Standards (IFRS) requirements.

As a result more local authorities and councils are calling in experts to assess their property portfolios to help make the most of their property assets but also manage the increasing level of red tape.

Rock said: “In undertaking valuations, the local authority has to satisfy a number of regulatory bodies, which makes the process increasingly complex. This includes RICS’ ‘Red Book’, the Chartered Institute of Public Finances and Accountancy and the IFRS.

“The ‘2013/2014 Code’ also requires authorities to undertake revaluations with ‘sufficient regularity’ to ensure that fair values do not differ ‘materially’ from year to year.

“This requires a ‘sample’ to be undertaken annually and places a big burden on the overstretched resources of most, if not all authorities in the country.”