Plymouth City Council has spent nearly £30m on South West retail parks and business units including the newly-built Carkeel Gateway in Cornwall as it continues to invest in property to offset the impact of Government funding cuts.
Details have emerged of how the local authority splashed the cash on four large developments in 2020 including the £10.3m acquisition of the Carkeel Gateway Retail Park, in Saltash.
The large retail development, next to the A38, was only built in 2019 and includes Iceland, Home Bargains, Costa and McDonald’s outlets.
The council also spent £8.9m on Plymouth Trade Park, in Cattedown, home to companies such as Alan Skuse, Western Electrical and Howdens Joinery.
The local authority also purchased a unit in Kestrel Way, on Exeter’s Sowden Industrial Estate, for £6.2m, and units at the new industrial development at Treleigh Park, Redruth, Cornwall, for £3.8m.
The council said it has taken advantage of rock-bottom interest rates to invest in the properties and gain an income so it can maintain essential services.
A council spokesperson said: “We have taken advantage of historically low interest rates to acquire and develop properties to stimulate regeneration, economic and employment growth in the local area.
“It also provides a long term income to improve the wider financial position of the council and help protect vital frontline services.”
The recent buying spree follows more than five years of property acquisitions and investment in new-builds by the authority. In 2016 it snapped up Friary Retail Park, in Plymouth’s Exeter Street, and two years later nabbed the former Toys R Us store in Western Approach.
Other acquisitions and developments include the forward funding of the Next out-of-town development at Marsh Mills and the huge Crownhill Court office building at Crownhill.
The spokesperson said this building was bought to secure the future of the Valuation Office Agency in Plymouth “through the refurbishment of a redundant 57,000sq ft office building”. The acquisition safeguarded 100 civil servant jobs and created a further 250 posts.
The city council also has a number of “direct development” schemes, using its landholdings to build industrial units and work spaces for companies to move into and to meet an ongoing demand for high-quality work space.
Examples include Oceansgate, at Devonport, which specialises in marine technology companies, and the construction of 27,000sq ft of industrial units at Haxter Court, Belliver, just before the start of the first 2020 lockdown. These units were finished in November 2020 and are all either let or under offer. Hearder Court Phase 2 at Langage Business Park is now fully let with the £2m Phase 3 construction now underway.
Plymouth City Council’s spending comes as English councils went on a £6.6bn commercial property buying binge between 2017 and 2020, snaffling office blocks and shopping centres to offset Government funding cuts.
However, public spending watchdog the National Audit Office has warned the spending spree could leave many local authorities potentially exposed in the event of an economic recession or a property crash.
In 2020, Plymouth City Council became the first local authority in the country to secure an interest rate swap to protect it from hikes in borrowing costs on a debt pile of more than £465million.
The council struck a deal with the Santander UK bank to lock into low interest rates and reduce the risk that a jump in the cost of borrowing could hit its expenditure programme.
This was the first time this financial instrument had been used by a council for almost 30 years, since the House of Lords ruled them unlawful. But the 2011 Localism Act granted councils power to carry out interest rate swaps.
Plymouth City Council sees its recent expenditure as good value for money and the spokesperson said: “Like all other organisations, we are keeping a watch on the full impact of Covid-19, and there clearly have been issues in some sectors such as high street retail and hospitality. The trade counter and industrial units are, however, currently performing really well.
“The council takes a fund management approach to ensure risk is appropriately managed and diversification across the property sector is a key pillar of the approach. Investments are tracked to make sure they keep performing for the council and for the people of Plymouth.”