In recent years, local authorities have created something of a commercial property gold rush.
Low-interest government loans have been used to buy offices and leisure facilities as well as shopping centres. So many billions of what is sometimes uncharitably described as ‘dumb money’ have now been sunk into these investments, it’s believed in some cases to have skewed property values in certain sectors.
As part of this boom, Cherwell District Council, of which I’m a member, bought the struggling Castle Quay shopping centre in Banbury in December 2017.
The timing really couldn’t have been worse, with anchor store BHS already shuttered and other big operators M&S and Debenhams showing signs of stress, but they were undeterred.
The justification for this questionable move was the previous owner’s refusal to commit to an expansion project they regarded as unviable.
But the council believed they knew better, inspired by what I regard as flawed due diligence and over-optimistic market intelligence. Already-known problems with Debenhams were presumably missed as eight months later it posted a £491m loss. Three years on, we now know the ultimate conclusion.
Maybe that ‘dumb money’ description wasn’t so unfair after all.
“Ambition often eclipses reason when you’re spending someone else’s money”
The landlords subsequently convinced the council that purchasing the scheme was the only way to realise its grand extension plans. A better option would have been to co-operate on the project, rather than taking on the full liability, but ambition often eclipses reason when you’re spending someone else’s money.
The continued slide of retail and the pressures of lockdown have resulted in a substantial annual loss, with a similar picture predicted for the forthcoming year.
A recent valuation shows the scheme is now worth less than half of what the council paid for it, with £30m wiped away in less than four years. All this has translated into frontline service cuts and an understandably unimpressed local population.
This is not to say that councils shouldn’t be drivers of town centre regeneration. Regular readers of this column will know I’ve long advocated for government to play a leading role and other local authorities have shown that it can be done.
But the problem in Banbury is a lack of vision, with precious little insight or innovation into how the existing scheme can be saved, let alone enhanced. The sum total of revitalisation efforts so far amount to an indoor food market and some new toilets.
The lack of insight in the council is palpable, replaced by an almost evangelical reliance on ‘the experts’ – ranks of eminently capable, and no doubt expensive, consultants who are believed to possess magic wands. Some may even be the same ‘experts’ that told the previous owners they should chuck in the towel.
Relying on advisers is all very well, but unless you know the right questions to ask how can you understand the answers?
“My objection is not just a conviction that councils shouldn’t be playing around with commercial investments, but a belief that retailers deserve better than to be bit players in these political morality plays”
As anyone who has been drafted in on projects after bad decisions have already been made will testify, if your brief is to raise a dying horse, sometimes all you can do is keep flogging it while hoping to eventually see the cavalry.
My objection to all this is not just a conviction that councils shouldn’t be playing around with commercial investments, but a belief that retailers deserve better than to be bit players in these political morality plays.
During a recent council meeting on how we can reopen our high streets post-Covid, I asked if we’d invited any retailers to offer their views. That this was regarded as a novel idea spoke volumes.
High streets are rarely revitalised by behemoth shopping centres. In fact it’s often the reverse. Instead, it’s usually diverse enclaves of independent traders who bootstrap town centres.
Supporting those businesses may not be as sexy as sweeping legacy projects but, as we’ve seen in many towns across the country, financially and politically, it’s usually a less risky strategy than recklessly speculating with taxpayers’ money.
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