Estates update

Report: 7
Date: 19 November 2009
By: Director of Resources on behalf of the Commissioner

Summary

This report seeks to provide Members with an update in regard to the estates responsibilities covered by Property Services and the specific issues that have been addressed since the last report.

A. Recommendation

That Members note the Property Services’ update provided.

B. Supporting information

Introduction

1. At the Finance and Resources Committee on 18 December 2008, it was agreed that Property Services should continue to provide a report on real estate and Property Services’ related issues to alternate Committee meetings. Source documents can be found on previous relevant reports and also in the Members’ Library, the last paper was presented in September 2009.

2. In addition to the delivery of the current estate strategy, including maintaining the existing MPA estate; undertaking modernisation programmes and providing facilities to meet operational needs, and addressing environmental issues, the Property Services Department includes a specialist operational support team who provide advice and support for special events; logistical support at major incidents; physical target hardening of vulnerable buildings; crime scene forensic support; crime scene plan drawing and reconstruction; specialist methods of entry/protestor release; covert property management, and emergency planning in support of major incidents.

3. This report provides updates on specific work-streams and key areas of responsibility; where approvals are required for specific programmes or projects, proposals will be presented separately.

Market overview

Residential

4. Capital values fell in February 2009 to a low of 20% below the peak of the market in October 2007 and transaction levels have fallen by two thirds. Since February 2009 there has been a slow recovery in values with a gain of some 9.5% in values to September 2009. House prices are now at the same level as they were in September 2008. The level of turnover remains at some 50% of the volume achieved at the height of the last boom. There are now signs that a recovery is in progress. It is unclear at this stage whether this recovery is sustainable with conflicting views on the outcome for 2010.

Key points on the current state of the market are set out below:

• Halifax & Nationwide have now reported rises in capital values for 5 consecutive months
• Some industry observers are now predicting further small rises in 2009 and into 2010
• There is still a considerable level of uncertainty in the market leading to a prevalent “wait and see” approach for both vendors and purchasers, although the volume of properties for sale is gradually increasing
• Only realistically priced properties are selling, although some Vendors who have been renting their properties are now considering re-marketing them
• Despite a reduction in base rates to 0.5%, mortgage approvals are still historically low and lending highly restricted with mortgage rates far higher that the base rate and many lenders are requiring a Loan to Value ratio of some 60% - or better
• The exceptionally low interest rates have led to some cash rich investors purchasing rental properties, which will yield better returns than are currently available from deposits with Banks and Building Societies. This influx of cash may be fuelling a temporary short term recovery

Outlook for remainder of 2009

5. Original residential capital value projections for 2009 range from plus 5% to minus 30%. The present market looks to deliver an increase of 10 to 12% on present performance. 10% of the UK residential market comprises rental properties belonging to private investors. Whilst rental yields are increasing, negative capital growth has incentivised some landlords to sell up investment portfolios. Now that prices are rising again, it is likely that this trend will cease. There is still a relatively low supply of properties for sale and this may contribute to a continued upswing in values, at least until the end of this year.

Commercial Property Market

6. The year to 30 September 2009 has seen a severe decline in commercial property values with the leading index (Investment Property Database) showing a UK wide fall in values of some 25%, the sharpest reduction in values since the late 1980s. A number of commentators are now predicting that the market is bottoming out and investors with finance available are now increasing their activity in the investment market. Specifically, foreign investors have returned to the market and the lack of stock available at present is leading to the firming of yields.

7. Due to the general economic situation and financial uncertainty speculative property development has virtually ceased. Occupier demand for all types of property has reduced significantly due to the general financial situation with retail property especially badly hit. The reduction in speculative office development in London over the past year is starting to have an impact, as vacancy rates have now stabilised and some stock is being acquired. Transactions are still taking a great deal more time to conclude.

Outlook for the remainder of 2009

8. Despite the more positive views on the economy, commercial property is forecast to remain static in value through 2009. As tenant demand reduces headline rents are starting to fall in all sectors and this is having a greater impact on capital values than investor sentiment. Movements in exchange rates are also having an impact with foreign investors keen to pursue relatively cheap investments due to currency changes.

Estate Strategy

9. The member led panel (supported by officers from the MPA and MPS) set up at MPA F & R Committee on 23 October 2008, are in the process of reviewing the current Estates Strategy. Site visits and panel meetings have been held. Property Services are supporting the Panel as necessary and have drafted a new Estate Framework document for consideration by the Panel. Following this, the Estates Strategy will be developed.

10. The roll out of each Business Group’s strategy remains dependent on appraisal of the current and foreseeable challenges and the need to generate receipts to fund estate modernisation. Until suitable facilities are made available, much of the existing building estate will be retained. The costs of maintaining older building stock in terms of compliance etc. will increase pressure on already stretched revenue budgets. The modernisation of the estate will assist in ameliorating these costs.

11. As part of the MPS’s business planning process for 2010/11 – 2012/13, Property Services have identified and adopted two programmes to enhance the effectiveness of the MPA’s real estate portfolio:

Corporate Landlord (CL) Approach

The proposed move to a CL approach is informed by the principles of an Asset Management led approach to the management of the MPA’s real estate assets, as set out in the Royal Institute of Chartered Surveyors (RICS) Public Sector Asset Management guidelines

These guidelines set out amongst other things the need for an updated Estates or Asset Strategy, the benefits of a CL approach and regular reviews of property on a service or asset type theme.

A draft Estates Framework has been developed and tabled for review by the MPA Estates Panel. This will now become the basis for a revised Estates Strategy. At the same time we will commence a review of the office, training and storage elements of the portfolio. Of necessity these will be led by business demand from the respective Service Improvement Plan (SIP) or business planning strands.

Delivery of Property Services

A review of the Property Services delivery model is required to ensure that the service is cost effective, fit for purpose and is strong in ‘value add’,

The review seeks to address current issues for the MPS, including high costs of certain facilities/contracts and high maintenance backlogs. Also, real estate costs per square metre and per offices/staff employee must be reduced.

To date Property Services, have not constructively challenged user’s ‘wants’ from ‘needs’ and ‘value add’ has been limited. The aim is to standardise and reduce accommodation ratios and maximise the utilisation of facilities, which directly links to the CL approach.

The key elements include:

• Re-organising the staffing structure of Property Services, the objective being to enhance professionalism and technical skill sets to support the delivery of the CL approach.
• Review and renegotiate current outsourced contracts, including a review with the aim of streamlining the current processes; introducing incentivisation schemes and potentially renegotiating contract terms. The initial scope includes the review of manned security guarding of MPS/MPA premises; review of ‘in-house’ cleaning; review of energy contracts with the potential for collaboration with other public sector bodies.
• Property Asset Leverage; review restructuring financing for properties, including PFI, reviewing tenure options (leasehold and freehold) options and financial regearing

An outline of the scope and remit of these two programmes was presented to MPA Resources Sub-Committee in October 2009.

Acquisitions and Disposals

12. Schedules of Commercial and Residential disposals completed up to 30 September 2009 are shown in exempt Appendices 1 and 2. A further 15 properties were taken to auction on 26 October, a verbal update will be provided.

Acquisitions/Disposals under consideration

13. Within the framework of those elements of the estates strategy that have been approved, Property Services continue to consider other property opportunities. These are subject to the parameters of the current capital and revenue programmes. At this stage and pending the outcome of the Estates Panel strategy review, planned disposals are limited to residential property disposals only.

In line with the previously approved Residential Estates Strategy, 15 surplus residential properties are being offered for sale by way of auction. A further three properties are to be sold by way of private treaty in order that a comparison may be made between the two methods of disposal.

14. In line with the MPA Standing Orders a Paper will be brought to the Authority in the Spring 2010 outlining the proposed disposal plan of non residential properties in 2010/11.

Town Planning update

The London Plan

15. The Mayor of London is currently consulting on The London Plan- Spatial Development Strategy for Greater London. This is a draft replacement plan for the current London Plan (consolidated with alterations since 2004), providing new policies and amendments to existing policies and is out for consultation until 12 January 2010.

In June 2009, consultation on the London Plan Review Initial Proposals document was undertaken, in which the Mayor requested comments from the London Assembly and GLA functional bodies (which includes the MPA) on what future changes were needed to the London Plan. Representations were made on behalf of the MPA on 30 June 2009 to this document.

Following a meeting with members of the GLA on 15 September 2009, small changes to the draft replacement plan were made.

Property Services are now reviewing The London Plan- Spatial Development Strategy for Greater London and will submit representations on behalf of the MPA prior to the consultation deadline in January. The MPA are continuing to be well represented within the London Plan and many policies have now been amended to reflect policing needs throughout the different Borough's.

South East Plan

16. The South East Plan provides the Regional Spatial Strategy for the South East region of England for the years of 2006-2026. Adopted in May 2009, the document recognises the police as an important public and emergency service, which will benefit from developer contributions where necessary. Strategic support for policing over the next 20 years has been provided within this document. The document also promotes the release of Green Belt land where housing allocations cannot be met.

Killian Pretty Review Update

17. Following the publication of the Killian Pretty Review on 24 November 2008 which proposed 17 recommendations for modernising the planning application process, the Government published a Progress Report on 30 July 2009 seeking to take forward certain elements of the 17 recommendations. These elements are contained within three specific sub-documents which are out for consultation as follows:

• Improving permitted development
• Streamlining information requirements for planning applications
• Publicity for planning applications

18. The consultation document is seeking to extend Permitted Development (PD) rights to non-residential uses. This would potentially allow for greater flexibility in the MPA Estate as it would allow for development without the need to apply for planning permission. MPA facilities providing for example principally office facilities such as Frank O'Neill House at Oval will benefit from PD rights as outlined within the 'Offices; section above. However many other MPA facilities, whilst similar in nature to office, industry and warehousing, and institutional uses do not come under a specific use class and are considered sui generis. Consequently those facilities would not benefit from PD rights under this legislation. This is therefore a grey area and it may almost be necessary to create a new category for emergency services or sui generis uses. The deadline for comments was 23 October 2009. Representation has been submitted seeking to include policing facilities (or a more general emergency service umbrella) in order to allow for similar PD rights. Property Services will continue to monitor the Review.

Community Infrastructure Levy (CIL)

19. Community Infrastructure Levy Communities and Local Government have released a consultation paper on the Community Infrastructure Levy (CIL). The CIL seeks to introduce a new charge whereby local authorities will be empowered, but not required, to levy a charge on those undertaking new developments in their area. CIL charges will be based on a simple formula which relates the size of the charge to the size and character of the development planned. The proceeds of the Levy will be invested in local and sub-regional infrastructure to support the development of the area.

20. Recognising that all development has some impact on local infrastructure, services and amenities, and that it is only fair that sort of development pays a share of the costs, the CIL will seek to spread the costs of providing/maintaining infrastructure resulting from new developments more fairly. It is intended that the CIL will give developers more certainty as to what they will be expected to contribute, will speed up the development process by simplifying developer’s contributions, and will ensure that money raised from developer contributions is spent effectively in support the development of the area.

21. The deadline for responses was 23 October 2009. Appropriate representation has been made.

Proposed Amendments to PPS25: Development and Flood Risk

22. Planning Police Statement (PPS) 25 Table D2 currently classifies police, ambulance and fire stations and command centres that are required to be operational during flooding, as ‘highly vulnerable’. Strictly interpreted, this means that any new emergency service facilities of this nature should not be permitted in high flood risk zones It was not the intention of the policy to exclude all new emergency services facilities from the communities they serve in high flood risk areas and whilst the associated guidance notes, advise that police, fire and ambulance stations need to be located within their operational catchment area, even where it may be at high risk of flooding, in order to provide effective emergency service cover in normal circumstances to existing communities, there is still some ambiguity.

23. It is therefore proposed by Environment Agency to amend PPS 25, to ensure that those police, ambulance and fire stations which would not required to be operational during periods of flooding, should be classified as ‘less vulnerable’ and therefore permitted in high flood risk zones. Emergency services facilities that are required to be operational during flooding would continue to be treated as ‘highly vulnerable’. Communities and Local Government are inviting responses to the consultation documents.

24. This reclassification is key to supporting the MPA/MPS’s facilities, where over 43 buildings are currently located within London Flood zones. The deadline for responses was 3 November 2009. Appropriate representation has been made.

Safer Neighbourhoods

25. The Safer Neighbourhoods programme is anticipated to complete in 2010/11. Following the establishment of 189 bases under SN 1, work is currently proceeding and 95 of the total 117 projects under SN 2 are in various stages of design and development:

• 29 projects have been completed
• 12 projects are under construction
• 12 site starts planned imminently
• 10 sites in procurement
• 10 projects in detailed design
• 16 in feasibility
• 6 where construction orders have been placed but are awaiting lease completions
• 22 properties are still to be acquired; 4 of these are currently considered to be in areas where it is highly unlikely that any suitable leasehold space will become available. Other options to satisfy this requirement are being developed.

26. A short presentation was given to the Resources Sub-Committee in October 2009, the next 6 month update paper the Finance and Resources’ Committee is due in March 2010. This report will provide analysis of the success of the Programme and lessons learnt.

Contract Management

PFI Contracts

27. The PFI Contractor is nearing completion of the Benchmarking and Market Testing on the South East London (SEL) PFI Contract, covering Bromley Police Station (PS), Deptford PS, Lewisham PS and Sutton PS. The target was to complete the benchmarking exercise by October, however the Contractor has not provided all the necessary information and it is now anticipated that the exercise will be complete by December. Negotiations are still ongoing with the Contractor in regard to pay parity between former MPS personnel and their direct labour as previously agreed. Property Services will report back to Committee on both issues Spring 2010.

28. Property services continue to work with Central Operations (CO) to drive efficiency savings at the Metropolitan Police Service Training Centre (MPSTC) Gravesend Firearms Facility around the existing booking management and catering process. Improvement works have now been completed at MPSTC Gravesend comprising additional changing/locker rooms and accommodation for the disabled including access ramps, bedrooms and shower facilities.

29. Since the Central Operations Paper to MPA Finance Committee in October 2007 identifying the shortfall in training provision, MPA approval has been given to investigate an option for the development of a new north-west MPS Firearms Training Base. An update paper will be submitted identifying areas of funding explored with the Home Office; highlighting the options that had been considered to address the financial shortfall and outlining the studies undertaken to develop longer term solutions.

Rating Revaluation 2010 (RPL)

The 2010 Draft Rating List was published in the first week of October 2009. This starts a consultation period which is concluded when the List is ratified on 1 April 2010. The business rates liabilities for the next five years is calculated using this list. The analysis has started using summary valuations for each of the Met’s properties which have bee published by the Valuation Office. A new contract for Rating Consultants to cover the period April 2010 to March 2015 will be appointed in November. The consultants will carry-out a detailed analysis of the new list.

The MPA’s rates liabilities for 2010/11 were reviewed in Summer 2009 as part of the budget planning process. It is highly probable that liabilities will increase but this cannot be confirmed until the transitional relief scheme and uniform business rate multiplier are published in December 2009. Budgetary provision is being made in the 2010-13 budget submission.

Facilities Management

30. Following the successful transfer of facilities management services at the 3 CCC in June 2009, a number of facilities management services provided at Empress State Building moved over to the FMS contractor Balfour Beatty Workplace (BBWL) in October 2009. Over 85 staff providing cleaning, reception, conference room management and security transferred successfully as part of the changes in service provision.

31. These transitions contribute to the consolidation of previous supply contract arrangements in line with the developing Property Services’ contract rationalisation strategy. The financial implications are detailed in Exempt Appendix 4.

Major Construction Frameworks

32. Property Services have recently commissioned a review of the performance of the IESE (formerly SECE) Major Contractors Framework, which has been in use by the MPS for approximately 18 months. The review has focussed on the business processes used, best practice, the roles of the various parties involved, the projects undertaken to date and the lessons learned. The final report together with recommendations should be received in November 2009 and will inform the use of the framework on future projects.

33. In conjunction with Procurement Services, Property Services are developing proposals to utilise the IESE Framework to deliver elements of the Forward Works Plan. Similar types of works or works in the same location will be packaged together to enable delivery through the framework, thereby improving value for money through economies of scale and improving speed of delivery.

Key Construction Projects

34. Greenwich Patrol Base (Warspite Road) has completed and occupation by the BOCU anticipated in November 2009. Proposals for the creation of a property/exhibits store facility within the same building are being progressed.

35. Work commenced in July 2009 at Waltham Forest BBCC (Leyton). Completion is anticipated in October 2010; progress continues to be in line with expectations.

36. The commencement on site of the planned project at Lillie Road, London SW6 has been further delayed by the completion of the formal discharge of the planning conditions with the London Borough of Hammersmith and Fulham, it is now anticipated that works will commence in November 2009, although this is dependent on the satisfactory resolution of current issues.

37. Works to fit-out the property at Polar Park, Heathrow, should now commence in November, following some slight delay in reaching formal agreement with our landlord with regard to the works.

38. The formal lease arrangements for Barking and Dagenham (Fresh Wharf) Combined BBCC and Patrol Base were completed in mid October, and with all design and procurement work complete we anticipate a site start date in November 2009.

39. Works commenced in July on the refurbishment of the 4th floor Servery at New Scotland Yard. Works were slightly delayed as the main Contractor entered administration, but have continued since the company was purchased by a competitor and the contracts novated. The works should now be complete in early November and in addition to the servery include the redecoration of Peeler’s restaurant and 4th floor facilities.

40. Works to upgrade 3 floors of open-plan office accommodation at Marlowe House are due to commence on-site in January 2010, and should be completed by June 2010.

41. Submission of MPA Paper detailing proposals for construction of Strategic Command Centre within ESB to support London Resilience will be brought forward to Committee in Spring 2010; if approved, construction to commence April 2010.

London 2012 Olympics

42. Various meetings and workshops have taken place between Property Services and CO to identify responsibilities for the different aspects of the event, and to ascertain support required. Areas include Centralised Coordination Centre facilities, and general office accommodation requirements in the lead up to and throughout the Games period, as well as the off-site Briefing & Deployment centres, feeding centres, etc., required during Games time.

43. Meetings have been held with the LDA in regard to Olympics Legacy Master Planning and with specific Local Authorities in regard to Deployment Base facilities required in the lead up to and during Games time.

44. Updates relating to real estate related matters will be submitted to the MPA Olympic Sub-Committee as appropriate.

Special Events

45. The Special Events Team has supported a range of events since the last update, including:

Notting Hill Carnival

Property Services once again provided significant operational support to this year’s carnival which proved to be one of the biggest and most complex carnivals to date. In addition to building temporary feeding centres, installing crowd control barriers and traffic management systems the team also created temporary CCTV Control Room facilities.

Operation Bentham (Climate Camp)

Running concurrently with Notting Hill Carnival, OSG assisted with the set-up of portable cabins, kitchen facilities, briefing and feeding marquees to facilitate 350 people along with toilets for police use and bottled water for police to provide if requested by the protestors. Protestor Release Teams remained on standby throughout the Operation.

Operation Fallom. Property Services installed search cubicles and temporary custody facilities during the ‘Lovebox Weekend Festival’ held at Victoria Park in East London. This operation resulted in 200 detections and is a tactic deployed at public events to provide a safe environment whilst reducing the use and availability of drugs.

Other events supported included numerous sporting events and pop concerts at Wembley and Hyde Park, the Last Night of the Proms which was broadcast live from the Royal Albert Hall to Hyde Park, and the Indian and Pakistani Independence Day celebrations which occurred across London.

Forthcoming events include Preps for Remembrance Sunday and Lord Mayor’s Parade.

Environmental Management Programme

46. The MPA/S Environment Report for 2008/09 will be published shortly. Highlights occurring through 2008/09 include:

• Overall carbon emissions from MPS operational vehicles (road, boats and helicopters) increased 2.5% on the previous year, primarily due to an increase in fuel consumption of the road vehicle fleet. Carbon emissions have reduced from boats (4.7%) and helicopters (4.5%). Daily hire vehicle utilisation has reduced by 7% on the previous year.
• In 2008/09 MPS energy consumption (based on actual data) decreased by 4.2% on 2005/06 levels. Building carbon emissions have stabilised as levels for 2008/09 have reduced 0.3% on the baseline year 2005/06. Carbon emissions per employee have decreased by 6.6% on the baseline.
• In 2008/09 MPS waste arisings decreased 24.09% on 2004/05 levels. The MPS has achieved a recycling rate of 41%, which is a 32% increase on 2004/05 levels. In 2008/09 paper consumption decreased by 2.79% on the previous year.

47. Development of the CSR (Corporate Social Responsibility) Strategy 2010 - 2013 is in progress, ready for issue and application from April 2010 onwards. Forthcoming steps will be identification of material issues and stakeholder consultation.

48. Work has been ongoing with business groups to support them towards mainstreaming CSR considerations within their business plans. CSR and sustainability are also included within the Policing London Business Plan 2010-13; contributing to the strategic context and supporting the corporate objectives. Delivery of the Environmental Management Programme is reflected in the 2010-13 budget submission.

49. The Head of Environment and Sustainability working closely with Transport Services is leading on behalf of the GLA Group on a feasibility study to identify the opportunity for utilising electric and alternatively fuelled vehicles within the fleet as part of the Mayor’s Electric Vehicle Plan. A paper has been prepared for presentation to the MPA on 22 October 2009.

50. Across the 10 designated MPS buildings within Tranche One of the Building Energy Efficiency Programme (BEEP), the latest average forecast carbon savings per building is 216 tonnes CO2/annum - an average percentage reduction of carbon of 24.3%. The London Development Agency and members of the BEEP Steering Group are currently evaluating the ITT responses received for the Tranche Three of the programme. (This is differentiated from Tranche One by being a framework offering an innovative financing arrangement for energy efficiency retrofit works, widening its applicability to the public sector).

51. Following the MPS gold award in the Mayor of London’s Green Procurement Code Progress Review for 2008/09, the MPS has also been awarded in the Mayor of London’s Green Procurement Awards engaging suppliers and policy, strategy and communication.

52. Following an extensive consultation period, work progresses to develop the MPS-wide environmental awareness campaign. This employee engagement programme will be delivered through a communications strategy using a range of tactics and key messages. The campaign is due to be launched in quarter three 2009 with the aim of encouraging employees to reduce their individual environmental impacts.

53. The MPS was unsuccessful in its funding bid to the London Waste and Recycling Board for continuation of the recycling roll out. Funding would have enabled the expansion of the corporate recycling scheme to a further 100 sites covered by the Facilities Management Services (FMS) contract. Therefore, the funding source for expansion of the scheme is yet to be identified. Without further expansion of this scheme, the FMS suppliers are not expected to meet their contractual recycling target of 45%.

C. Race and equality impact

1. Any equality and diversity implications arising from the matters referred to in this report are being assessed as part of the individual project or item and will be reported separately to the Committee at the appropriate time.

D. Financial implications

1. Any financial implications in regard to the items included under the appendices will be reported in full to the relevant committees at the appropriate time.

E. Legal implications & risks

1. Contract or other documentation in regard to the items referred to under the appendices will contain all the usual commercial terms and provisions, and no unduly onerous or unusual terms – except where reported otherwise.

2. Significant risks have been evaluated and considered and steps taken to minimise or manage such risks.

3. All reported matters are considered to be within the powers of the Authority.

4. All/any disposal represents the best consideration that can reasonably be obtained – save where stated otherwise.

F. Background papers

None

G. Contact details

Report author:  Jane Bond, A/Director, Property Services, MPS

For information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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