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Meeting government austerity with a property strategy for the futureBy: Wendy Hammond

The Shard, LondonFrom whispering about green shoots to boldly praising a full recovery, we have seen a lot more positive news about the economy over the last couple of years. However, within the public sector, austerity measures continue to apply pressure to budgets as ongoing financial cut backs make it necessary to implement property strategies that represent significant efficiency savings.

There is often a perception the public sector is lagging behind when it comes to innovative and efficient use of property and that it needs to catch up with the private sector. But this is not necessarily the case. Focusing on the future of how day-to-day working will evolve, the government is currently implementing its strategy to create an efficient, fit-for-purpose and sustainable estate that will match the performance of the private sector.

By 2020 significant reform in how the state uses property will be implemented and the first step towards this will be to reduce the need for office space, which will increase productivity, reduce costs, improve wellbeing and reduce the pressure on the transport system. The Way We Work (TW3) programme, developed by the Government Property Unit, is viewed as one of the cornerstones of civil service reform and will be in place by the end of 2015. TW3 focuses on giving staff the right tools, the right environment and modern working practices to realise their potential.

The government has already shrunk its estate by over two million sqare metres since 2010, which is equivalent to almost 36 Shard buildings. This reduction represents a saving of £600 million a year in running costs and has brought in a cumulative £1.4 billion from property and land sales.

Savings like this are impressive but they may also raise concerns as to how crowded the remaining office space has become. However, the TW3 strategy mirrors much of the private sector by working towards smarter, more flexible and more mobile working for staff. Currently more than 30% of public sector jobs are part time, compared with 25% in the private sector. By offering more flexible working options the public sector will be able to attract and retain more talent.

The Ministry of Justice is reducing its London estate to one headquarters building by 2016 as part of its TW3 strategy. It has already reduced the number of buildings from 18 to four, which saves the department £30m a year. The department has now also begun to implement new office layouts to support smarter ways of working including a large reduction in paper use, a touchdown space for laptop users and a range of desk sizes.

In addition to offering staff more mobile working devices such as tablets and laptops the department is also developing a number of ‘Commuter Hubs’ within the M25 to allow staff to work in different offices and local courts.

Beyond the use of office space and property for workers, the public sector is also exploring new finance models to make the most of its portfolio. It has issued one of the UK’s first Islamic bonds, using £200m of freehold government property.

This is part of a plan to utilise public property to help stimulate economic growth. The government plans to generate more capital receipts, release underused land and buildings, reduce running costs for both central and local government and deliver more integrated service by encouraging collaboration between departments. CBRE has recently worked on a number of public sector projects to help to implement these goals, including an ongoing project to enable the merging of groups to increase collaboration and improve results.

There is also an ongoing drive to reduce vacant space. Only 3 per cent of the central government estate was vacant in 2013, while the national average for private and public sector is 10%.

This is partly being achieved by the ‘One Civil Service’ offices that are being created across the country and allow different organisations to share the same space. In Bristol the Temple Quay Campus has brought 12 departments and 28 agencies together in a modern, flexible working environment. In Liverpool the number of public sector buildings will be reduced from 47 in 2010 to just 17 by 2020.

While the ongoing pressure of budget cuts has led to this bold strategy by the public sector, it is easily comparable to the movement of the private sector towards efficient use of their property and, by extension, their work force.

However, the public sector faces additional hurdles as it tries to implement its property strategy. One of the biggest of these is that a government is only in power for five years, so its interest in investment may only be for that length of time. It is extremely difficult to engage cross departmental thinking for a longer term strategy that can be agreed by all parties.

There is also the additional scrutiny faced by the government whenever money is spent compared to the private sector. Cutting costs and improving efficiency may be the primary goal, but it is all too easy for a headline to focus on the government ‘wasting money’ on giving workers iPads when in fact the use of new technologies can actually improve collaboration and efficiency in the long-run.

The public sector has made significant strides in improving efficiency and adapting its estates strategy for the future in the wake of significant budget restraints. It will continue to create positive results as long as it is given a mandate to do so by successive governments and can stand up to the scrutiny of those looking to expose government waste, whether it exists or not.  

About the author

Wendy Hammond, Associate Director, Workplace Consulting, CBRE

Features January 2015

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