Conservative proposals to transfer public sector property to a new company are all about incentives – incentives to release space and sell surplus assets. Success relies on exposing public sector decision makers to the forces of the property market.
The theory goes that paying rent for the property it occupies will make a department acutely conscious of the real value of that property. A whole range of previously unpalatable measures suddenly start to look like common sense. The savings achievable in this way are certainly enough to make the unthinkable thinkable.
The experience of the private sector is that over 20% can be saved in just two years. Making property services more cost effective and using property assets more efficiently can offer significant savings, but the really big money is in using less space or using cheaper space. Not only are there savings to be made in rent and service charges, but the space saved can be sublet or sold.
You think there is no space to be saved in your office? Experience suggests that space savings are nowhere near as difficult as a glance around might suggest. For starters, forget how much floor you can see and ask yourself whether every desk or every meeting room is in use. A thorough survey of space use can often find over 50% unused. Desks will be empty due to annual leave, sickness or appointments away from the office. Meeting rooms dedicated to specific floors or teams will be empty. Every enclosed office or partitioned space is likely to have a corner without much happening in it.
To put this in perspective, it can easily cost over £40 a year just to accommodate a waste paper bin. The excuses for wasted space are familiar. Everyone likes their own desk. A generous personal workspace makes employees fell valued and comfortable. Director X wants to be able to shut the door when he has a bit of a shout! But are those reasons really worth doubling the rent for?
If you want to save space, try a combination of the following: create an open plan layout where the building structure allows; reduce individual space standards (and see whether anyone notices); introduce desk sharing for those often out of the office; encourage home working; share meeting rooms between more teams or floors.
Space use should be reviewed at a more strategic level. How much space is being left dormant to allow for growth or occasional restructurings? Do space allocations reflect the organisation’s objectives or priorities? Are property costs allocated to users in a way that might incentivise them? Is there another organisation that you could sensibly share with? Are you well positioned to take advantage of any favourable changes in the property market? Could you operate from a less costly location?
The question of location is a serious one for public sector organisations, under long-standing political pressure to take their back-office functions out of London and the Southeast to one of the towns or cities identified in Sir Michael Lyons’ 2004 report. The justification has always been clear – not just efficiency, but regional economic growth, devolution and pressure on the Southeast are all significant factors. What is, perhaps, lacking is an irresistible incentive.
We have been here before, of course. There is no point recreating the failed Property Services Agency of the 1970s and 1980s and giving it the additional responsibility of owning the property it manages. The PSA tried to provide too many property services itself and became too slow to react. Developing its own policies and strategies in isolation from the external marketplace, it failed to deliver either the services its client departments wanted or the positive strategic direction needed to deliver significant change within the government estate.
The major pitfall of the PSA was not that it did not know what to do, but the slow speed at which it operated. Often by the time it eventually acted, the moment had passed. The new asset-owning company proposed by the Conservatives must be both lean and mean. The effectiveness of their proposal lies in making public sector property part of the wider property market place and decision making more exposed to market forces.
Rob Oldham is a senior director at property consultancy CB Richard Ellis
