According to data compiled by estate agents Savills, UK local authorities invested £4.1 billion in commercial property in the last four years but their share of the UK commercial property market remains small.
In 2017 Britain’s local authorities spent £1.8 billion on commercial property, a 1,868% increase over the £93.8 million they invested in 2014.In the first half of 2018, council spending on property totalled £994.5 million. The top five spending authorities are Warrington, Canterbury, Runnymede, Spelthorne and the City of London.
In 2014 the total share of the commercial property market owned by local authorities was 0.2% which then became 3.4% in 2018. In 2015 the government announced that by 2020 local authorities would have to totally finance spending from revenue raised locally. The Public Works Loan Board provides low interest loans for local authorities to purchase commercial property as investments to increase revenue.
Many property deals by local authorities are for property that is purchased to kickstart town centre regeneration schemes.
Mark Garmon-Jones, a director of Savills UK, is not concerned that local authorities will become notable commercial property investors. He said:
“As long as they are well advised, from houses like ourselves, then fantastic, they just need to tread carefully and not get carried away.”
At a 3.4% share of the commercial property market, local authorities are not major competitors to private investors. Local authorities benefit from low interest loans, but commercial mortgages are available at reasonable rates for private investors.