From public toilets to courts, churches and substance abuse clinics, the public sector has auctioned off thousands of quirky properties over the years.
As local authorities and government departments face more pressure to identify and sell surplus assets in order to hit housebuilding targets and improve public finances, one might expect public sector lots to be flooding the auctions sector.
Instead, the number has halved since 2008, according to Essential Information Group figures analysed by Estates Gazette.
Seven years ago, 1,188 lots were offered for vendors that included councils, the NHS, central government and other public bodies across England and Scotland, but this has steadily dropped, to 612 in 2015.
Sales have fallen by 48% to £101.4m, accounting for just 3.2% of all auctions revenue in 2015. In 2008, the number was 5.1%. The figures underplay the significance of the drop for the auction houses that derive a significant amount of business from public sector clients; across the country competition for local authority contracts is fierce.
Why have the numbers declined? Possibly they reflect a reduction in public sector sites being sold off through any disposal method, although this would be against the grain of government policy. Unfortunately, this is hard to prove; the Government Property Office, Local Government Association and Homes and Communities Agency were all unable to provide EG with annual figures for sold public sector sites.
Allsop residential auctions partner Gary Murphy suggests the supply of easy pickings may have dried up, referring to £1m-£2m ex-council houses in central London sold to fund investments in more efficient social housing projects. “There were only a few of those properties that were available to sell,” he says.
Out of the top 10 public sector lots sold at auction since 2008, four were houses – some divided into flats – in London and its immediate surroundings. The top lot was a 10,800 sq ft former care home in Highbury, N5, which Barnett Ross sold in 2009 for £3.7m. These empty care homes, too, are “nearly all gone”, says Lambert Smith Hampton auction director Simon Riggall.
Cheffins associate Ian Kitson highlights the effect of cuts to council property teams, saying: “Maybe they have been trying to manage the day-to-day running of their current assets and haven’t really had the time to sit down and contemplate selling things and planning ahead.” Strettons director Philip Waterfield recalls a manager from a council in the South East who lacked “the time, capacity and ability” to release the value of the 400 assets he looked after.
Missed opportunity
Whatever the reasons, the trend is unfavourable to the auctions sector, and potentially represents a missed opportunity for the public sector to raise capital funds from unwanted buildings.
This could be set to change. Government departments and councils have been told to “loosen their grip” on empty sites to hit the target of building 150,000 homes in the five years to 2020. From April, councils will be allowed to keep all of the capital receipts from assets they sell, to invest in projects aimed at improving services. The Housing and Planning Bill going through parliament at the time of writing would also give the communities secretary the power to force councils to sell off land.
Most agree that very large housing sites are unlikely to be auctioned off, but there may be an appetite to dispose of smaller assets, particularly in light of the acute budget pressures facing many public bodies. Kitson says he cannot remember the last time Cheffins sold anything for the public sector, but in the past month or two has had conversations with two councils that are going through their property stock as a result of “funding issues.” Often these assets are “strange and bizarre, [the type that] sells best at auction,” he adds.
Riggall says LSH is busy with public sector work as organisations search their books for sites to sell. “There’s a real desperation as they start scraping the barrel,” he says. NHS trusts “are trying to 
find any nursing homes, clinics, anything to offset [their] debt”, while the Homes and Community Agency is identifying “thousands of little properties”, he adds.
However, auctions seem to account for a falling proportion of sales receipts at NHS Property Services, which handles around 3,500 assets worth £3.4bn. In 2014-15, auctions made up around 20% of sales receipts, but so far in 2015-16, the figure is 2.5%. Head of portfolio management Kieran Kinsella says more than 200 local estates plans are being prepared with clinical commissioning groups and it will be important to “reduce running costs, generate capital receipts for reinvestment, soundly prioritise future investment and look for opportunities to share property, particularly with social care and the wider public sector”. He praises the transparency and speed that auctions offer, although some policy analysts have suggested that refurbishing and leasing NHS properties would offer better value than selling them.
Pugh & Co, which has offered the highest amount of public sector lots of any auction house since 2008 [see table], has seen no decline in the number of assets sold for public bodies – they still represent around 15% of all lots – but their average value has dropped, says managing director and auctioneer Paul Thompson. He says organisations “have seen that with some of these smaller, lower-value sites, they have got traction in the market and speculators are looking for areas to invest in.”
That is not to say there are no prime public sector lots left: a Southwark Council-owned bungalow in Peckham, SE15, was sold by Savills last November for £920,000 off a £590,000 guide. CP Bigwood has worked with three West Midlands councils for 15 years and the relationship has evolved from selling “run-down residential” lots to sites “across the whole property spectrum”, says chief executive office and auctioneer Rory Daly. The biggest demand is for car parks, adds Daly, whose auction house is an outlier, having seen no decline in local authority business.
If the public sector wishes to use the auctions sector effectively to dispose of difficult sites, it might want to rethink offputting overage clauses and avoid chasing the lowest fees. The contracts process is one of the “biggest challenges” in working with public bodies, according to Richard Reed, head of property at John Pye Property, and can “limit the best sales price”.
There is clearly a drive to dispose of more public sector properties; if organisations and auction houses work together on this goal, there could be benefits for the auctions business, as well as the public purse.
