In the past three years, an unexpected type of market
participant has evolved in UK commercial real estate investment
– local authorities.
Read Upside - Autumn 2019
Outside of the real estate arena, this might surprise many,
particularly in times of reported austerity, but local authorities
have consistently spent, year-on-year, over £1.6bn on
commercial real estate investments since 2016.1 This
equates to almost £5bn over three years and is a significant
increase from the £1.2bn spent between 2008–2015.
The reason for the increase in activity is simple – a
relaxation in the Public Works Loan Board's (PWLB) rules in
April 2016 made it easier for local authorities to borrow from the
Treasury at low rates to buy income-producing assets. The spread
between the loan rate (typically 2-2.5%) and the return rate on the
rental income governs the profit made by the local authority to
then spend on local services.2
