Star comment: Councils think big to survive
If it comes as a surprise to hear that Shropshire Council is moving to buy major shopping centres in the heart of Shrewsbury, you have to realise this – there’s a bit of a party going on.
Up and down the country, councils are snapping up real estate, with shopping centres particular targets.
Surrey Heath Borough Council has spent £86 million on The Mall in Camberley. Canterbury City Council bought half of the £79m Whitefriars centre in that city. And so on.
How much Shropshire Council will – if it all goes through – spend to buy the Charles Darwin and Pride Hill centres, and buy out the lease of Riverside shopping centre, has not been disclosed because of commercial confidentiality, but is clearly going to be many millions.
How can it afford it in a climate of a crushing financial squeeze? At first glance, it looks like madness. But what councils are calculating is that this is a way of plugging gaps in their budgets in the face of funding cuts from central government.
Here is how it works. They can borrow at rates much lower than private sector borrowers can obtain, in order to invest in property that shows a much higher yield.
The exact mechanics of the prospective Shropshire Council deal are not in the public domain, but the potential benefits have been outlined by the council leader, Peter Nutting, who says its money is currently earning 0.64 per cent, and if it can get that up to seven to 10 per cent, it has to be to the good.
But there is another important dimension to this beyond the financial side of things. There is the matter of, so to speak, taking back control.
Taking control of the Charles Darwin, Pride Hill, and Riverside centres will allow the council to shape what they offer in accordance to its ambition to regenerate the town centre and support economic growth.
That is especially relevant when it comes to the Riverside centre, as it will be able to kick-start a much-needed redevelopment there, and having simultaneous control of the planning process will also smooth the path to regeneration.
This is an opportunity being seized in response to a particular set of circumstances, But there is also a risk, as it can be no other way, and who knows what the circumstances may be some years down the line.
That is all for the future, but for the present the council can be given credit for the fact that its response to big challenges is to think big.