Estates update paper

Report: 07
Linked to exempt item
Date: 11 February 2010
By: Director of Resources on behalf of the Commissioner

Summary

This paper 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.

Members are asked to note the content of the Paper.

A. Recommendations

That Members note the Property Services’ update provided.

B. Supporting information

Introduction

1. At the MPA Finance and Resources Committee on 19 December 2009, it was agreed that Property Services should continue to provide a report on real estate and Property Services’ related issues on a quarterly basis. Source documents can be found on previous relevant reports and also in the Members’ Library, the last paper was presented in November 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 Paper 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. Since February 2009 there has been a generally consistent recovery in property values in most regions of the UK, with London leading the way with a gain of some 7% in values to December 2009, an increase of 3.4% over the previous quarter. House prices in London are now approaching the levels as they were at the peak of the market in August 2007. The level of turnover remains below the volume achieved at the height of the last market peak. Whilst there are now signs that a recovery is in progress, it is unclear at this stage whether the recovery is sustainable with conflicting views on the outlook 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 7 consecutive months
• Some industry observers are now predicting further rises in 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 significantly increasing.
• The reduction in base rates to 0.5%, combined with increased optimism in the housing market has lead to increased demand. Mortgages approvals are still relatively low and lending more restricted, although lending has increased as restrictions have eased.
• 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 the current recovery.

Outlook for 2010

5. Capital value projections for 2010 range from modest increases to further falls. The present market, however, looks to continue to deliver an increase, at least in the near future. 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 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. It is predicted that the Government will try to maintain market stability, and that interest rates are likely to remain low for at least another six months.

Commercial Property Market

6. The year to 31st December 2009 has seen severe volatility in commercial property values. In the last quarter prices rose extremely sharply mainly driven by foreign investors taking advantage of the relative weakness of sterling. Overall the leading property index (Investment Property Database) showed a UK wide increase in values of some 3% for the year. Many commentators are predicting that the market has bottomed out and investors with finance available are now increasing their activity in the investment market. Demand for prime investment properties is increasing, driving prices higher.

7. Due to the general economic situation and financial uncertainty speculative property development and occupier demand for all types of property remains low. Vacancy rates are reducing as occupier demand soaks up available space; confidence in the financial markets in particular is leading take up of office space, especially in the City.

Outlook for 2010

8. With the more positive views on the economy, commercial property is forecast to increase slowly in value through 2010. At present, forecasters anticipate office rents rising slightly, warehouse and industrial staying neutral and, generally retail rents continuing to decline. UK based investors, both institutions and private are now returning to the investment market and foreign investors are still keen to pursue relatively cheap investments due to currency changes.

Estate Strategy

9. A verbal update will be provided in regard to the member led Estates Panel held on 21 January. A further meeting will be held immediately after this Committee Meeting.

Corporate Real Estate (CRE) Approach

10. Previously referred to as the Corporate Landlord Approach, a Principles document has been developed by Property Services to identify the corporate approach the Service will take in regard to the allocation and utilization of real estate. This document is being reviewed within the Services in readiness of implementation.

11. Taking these Principles forward, Property Services are leading three Service Improvement Programmes focused on offices, storage and training. Significant analysis of the Estate and service demand from operational units is being undertaken. This will inform options which are being developed to make better use of the Estate.

Delivery of Property Services

12. A review of the Property Services delivery model to ensure that the service provided is cost effective, fit for purpose and is strong in ‘value add’, is underway as part of the Service Improvement Plan.

13. The key elements include:

• Reviewing/re-organising the staffing structure of Property Services, to enhance service delivery and support the delivery of the corporate real estate approach.
• Review and as appropriate, renegotiate current outsourced contracts, to streamline the current processes; introducing incentivisation schemes and potentially renegotiating contract terms.
• Property Asset Leverage; review restructuring financing for properties, including PFI, reviewing tenure options (leasehold and freehold) options and financial regearing

Acquisitions and Disposals

14. Schedules of Commercial and Residential disposals completed up to 31st December 2009 are in exempt Appendices 1 and 2.

Acquisitions/Disposals under consideration

15. Within the framework of the elements of the estates strategy that have been approved and the service improvement programme, Property Services continue to consider other property opportunities. These are subject to the parameters of the current capital and revenue programmes, and the outcome of the Estates Panel review.

16. In line with the MPA Standing Orders a separate paper will be presented to this Committee Meeting outlining the proposed disposal plan of properties in 2010/11.

17. A property acquisition is proposed in Richmond town centre to provide new corporate training facilities. The project will be reported in detail to the Finance & Resources Committee in March 2010.

Residential Rent Review

18. The annual review of rents that the MPA charges on its residential properties is implemented in April each year. Members have resolved that rents should be increased to reflect changes made by Registered Social Landlords (e.g. housing associations)

19. Consequently, a review of the MPA’s residential rents has been undertaken in conjunction with an analysis of rent data published by Dataspring Research Centre (on behalf of the Cambridge Centre for Housing & Planning). The conclusion is that rents should be increased within the range 5.26% to 5.54%, depending upon the size of individual units. The average across the estate will be 5.43%. The practical effect of the increases is that the rent for a 3 bedroom unit, which comprises 70% of the total estate, will rise from £473.00 to £499.50 per month. The section house service charge (rent) will rise by £26 per month to £448.50 (i.e. 5.43%)

20. The Residential Estate Strategy targets a maximum core holding of 200 quarters and nil section house rooms. Based on the current trend in occupation levels, by which demand is projected to reach a plateau in 2010 after several years of decline, the residential rent income is forecast to produce income totalling £1.7m in a full year. This is approximately £56k more than the year-end forecast for 2009/10.

21. Two appendices are attached to show the existing MPA Rent Schedule at April 2009 (Appendix 3) and the proposed Rent Schedule that would be effective from April 2010 (Appendix 4).

The proposed rent increase has been presented to members of MPS Management Board who are supportive.

Residential Disposals

22. Exempt Appendix 7 provides an update in regard to decisions taken by this Committee in November 2009 in regard to the disposal of residential property, and requests direction as to which time line to adhere to.

Town Planning Update: Consultation on the draft Crossrail (Devolution of Functions) Order 2009

23. The draft Order will have the effect of devolving to Transport for London the Secretary of State’s land acquisition and associated powers in relation to the Crossrail project. The powers are being devolved to make administration of the Crossrail land acquisition process more efficient, and to remove the need for the Department for Transport to continue procuring independent consultancy advice in relation to Crossrail land acquisition. The closing date for consultation responses on this document was the 5 November 2009. There are no specific areas of concern for the MPA/MPS.

Governments response to Killian Pretty Review

24. The Planning minister has launched three fresh consultations as part of the government's response to the Killian Pretty Review. The consultations focus on:

• Development Management: Proactive Planning from Pre Application to Delivery
• Improving the Use and Discharge of Planning Conditions
• Improving Engagement by Statutory and Non-Statutory Consultees.

25. The consultation documents look at improving the pre-application process, reducing the number of conditions applied to planning permissions and improving the performance of agencies and other key bodies in the planning process.

26. Property Services will review ensure suitable responses are provided on the MPA/MPS’s behalf.

Planning Policy Statement 25: Development and Flood Risk Practice Guide

27. The practice guide states, in respect of the emergency service that 'Police, fire and ambulance stations and hospitals need to be located within their catchment area even where it may be at high risk of flooding. Overall risk to life may be greater than the risk from floods if response times for emergency services are longer. The practice guide reflect the proposed changes to PPS25 - Flooding, which were supported by the MPA in representations submitted in November 2010. Table D.2 in PPS25 recognises that there is a balance needed between preventing emergency services’ control systems and equipment being disabled in a flood, whilst providing emergency service cover to existing communities already located in flood risk zones. The guidance states that Emergency services can be located in flood risk areas providing the premises they occupy are not required to be operational during flood events. If facilities are identified as needing to be operational during flood events they should be classified as ‘highly vulnerable’ and located outside Flood Zones 3a and 3b. This particularly applies to features such as control centres, which while operational are not so bound to certain locations as emergency vehicle premises.

The London Plan:

28. Representations were submitted in regard to the stakeholder deadline of 12 January 2010 with references made to policing objectives and requirements. Specific reference to policing requirements within relevant Opportunity and Intensification Areas will add considerable weight to future arguments promoting policing facilities.

Safer Neighbourhoods

29. 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 100 of the total 117 projects under SN 2 are in various stages of design and development:

• 37 projects have been completed
• 15 projects are under construction
• 15 site starts planned imminently
• 10 sites in procurement
• 6 projects in detailed design
• 17 in feasibility
• 17 properties are still to be acquired; 2 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.

30. The next 6 month update paper for MPA Finance and Resources’ Committee is due in March 2010. This Paper will provide analysis of the success of the Programme and lessons learnt.

Contract Management: PFI Contracts

31. 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 2009, however the Contractor has not provided all the necessary information and it is now anticipated that the exercise will be complete by January 2010. Negotiations are complete 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 in 2010 following a review of the benchmarking exercise.

32. Work to drive efficiency savings at the Metropolitan Police Service Training Centre (MPSTC) Gravesend Firearms Facility and developing new training base requirements (as referred to under paragraph 27 below) continues.

33. Since the Central Operations Paper to MPA Finance Committee in October 2007 identifying the shortfall in training provision, MPA support has been given to investigate options for the development of a new north-west MPS Firearms Training Base. An update paper will be submitted in due course 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)

34. 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 are calculated using this list.

35. The MPA’s rates liabilities for 2010/11 were reviewed in December 2009 as part of the budget planning process to incorporate a new five year transitional relief scheme and Uniform Business rate multiplier. With the MPA’s rating valuation portfolio increasing by 35% overall and with the introduction of the new Crossrail Business Supplement, the 2010/11 rates liabilities are estimated increase by 13% on the previous year. The draft budget for 2010/11 has been increased by 11.75% to reflect the impact of these rates rises and assuming appeals will be made and successfully upheld. Further increases for future years have not been included in the budget submission to date.

36. Lambeth Smith Hampton were awarded the new contract for Rating Consultants to cover the period April 2010 to March 2015. They are undertaking a detailed analysis of the new list and formulating the MPA/MPS appeal strategy which will be implemented in the Summer. Further updates will be provided to Committee in due course.

Facilities Management: Maintenance of Our Buildings

37. Maintenance is split into 3 types; Reactive, Planned Preventative Maintenance and Planned Projects. Performance against reactive works is within the Key Performance Indicators and we are receiving a good service on the ground from our 2 contractors.

38. Planned Preventative Maintenance works are mainly undertaken on engineering plant; i.e. maintaining boilers, lifts etc. Again this is working well with compliance to statutory planned works achieving over 98%.

39. The third element of the works are Planned Projects. These are works to keep the current estate operating and consist of jobs such as replacement of boilers, windows, roofs, floors and lifts. They also include a raft of works to ensure legal compliance, landlord and tenant works, security, and Health & Safety. As reported previously, there is currently a backlog of works required to the estate. To 39address this situation and ensure funding is directed effectively, Property Services are implementing a programme of condition surveys. We have identified a percentage of the Estate (20%) on which we are performing full condition surveys. When the outcome of the surveys are confirmed, suitable maintenance strategies will be prepared for these buildings.

40. Coupled with the Corporate Real Estate approach we have adopted, we will be able to develop a maintenance cycle, within affordable parameters to ensure effective maintenance of the estate.

Reference is made in Exempt Appendix 6 to specific contractual matters in regard to facilities management contracts.

Key Construction Projects

41. Greenwich Patrol Base (Warspite Road) has completed and occupation by the BOCU anticipated in Spring 2010 once issues over the Power Supply have been resolved with EDF.

42. Completion of the project at Waltham Forest BBCC (Leyton) is anticipated in October 2010; progress continues to be in line with expectations.

43. Works commenced in December 2010 on the site of the planned project at Lillie Road, London SW6; following formal discharge of the planning conditions by the London Borough of Hammersmith and Fulham. Works are progressing in line with expectations.

44. Works to fit-out the property at Polar Park, Heathrow, commenced in January 2010 and are proceeding in line with plans.

45. The works at Barking and Dagenham (Fresh Wharf) Combined BBCC and Patrol Base commenced in November 2009, and after the completion of piling works, the internal fit-out is now proceeding.

46. Works to upgrade 3 floors of open-plan office accommodation at Marlowe House will be completed by June 2010.

47. A paper detailing proposals for construction of Strategic Command Centre within ESB to support London Resilience were submitted to the MPA in January 2010 and if approved, construction is planned to commence April 2010.

London 2012 Olympics

48. The accommodation and Estates issues arising out of the policing requirement for the Olympic Games are being considered as part of the development of the Business Cases for the various individual projects that comprise the 5 Olympic Programmes.

49. Issues arising out of the accommodation requirements are raised via on Accommodation meeting prior to being formally considered as part of the Business Case submitted to the Olympic and Paralympics Strategic Co-ordination meeting and the onward approval chain via the appropriate MPA arrangements (Olympic sub-committee) and finally the Home Office.

50. There is a growing demand within the Business Cases for accommodation close to or within NSY that is requiring close and careful management to ensure that only those activities / functions that need to be located close to the core Olympic Policing functions are accommodated with in NSY.

51. The principle other Estates issues in relation to the Olympics is the development of the plans for the three muster Brief and Deployment Centres. These sites located to the West, North East and South East of London are critical to the policing of the Games but all have planning, Land Ownership and restrictions currently affecting their use. All sites are in different stages of development and all need to have a solution identified and costed prior to submission of the Business Case.

Special Events

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

• Festival of Remembrance & the National Service of Remembrance
• Stop Climate Chaos march and rally
• Operation Fallon
• State Opening of Parliament
• New Years Eve Celebrations

Environmental Management Programme

53. Development of the CSR (Corporate Social Responsibility) Strategy 2010 - 2013 is currently in progress. Three stakeholder workshops have been scheduled for late January/early February to consult on identified material issues. MPS employees from a range of disciplines have been invited to enable a full evaluation of social, economic and environmental issues. It is anticipated that the CSR strategy will be launched in June 2010.

54. The Environment Team is currently working with staff from the Olympics Directorate to review Olympic Games-related business cases to ensure that the significant environmental impacts associated with the MPS’ role in this major event are identified and mitigation measures proposed. The Team will remain engaged with staff over the coming months to provide further technical environmental and sustainability expertise as required. The Environment Team is also working closely with Operational Support Group to identify and manage environmental impacts associated with other Operational Events such as Wimbledon and the Notting Hill Carnival.

55. The Building Energy Efficiency Programme (BEEP) project; a key mechanism for carrying out energy efficiency works as part of the MPS Climate Change Action Plan (CCAP) continues. The pilot project (Tranche 1), comprising 10 sites (9 of which are drawn from the top 45 energy consuming properties across the MPS estate) is currently in progress and all works are scheduled to have been completed by March 2010. A number of different energy efficiency technologies have been implemented including lighting upgrades, intelligent controls for kitchen extracts, solar film on windows.

56. In December, the BEEP procurement framework was launched by the Mayor of London, an outcome attributable in part to the pilot projects and the ongoing contribution of the MPS as a member of the BEEP steering group. The framework is open for use by all public sector organisations, and aimed at delivering Energy Conservation Measures (ECMs) through building retrofit. It comprises a panel of approved suppliers that are technically, organisationally and financially qualified to provide services that will deliver guaranteed reductions in energy consumption and associated carbon dioxide emissions for public sector organisations.

57. The development of the environmental awareness strategy, a significant element of the broader environmental awareness campaign, is nearing completion following a significant consultation within MPS internal stakeholders. The strategy development culminated in two workshops to develop the programme for the campaign that will deliver the objectives set out in the strategy. A pilot campaign will be carried out during Q4 of the 2009/10 financial year at a large police station and HQ from the top 45 list. The campaign has been designed for longevity and therefore is intended to be fully rolled out during 2010. The campaign will be monitored through a number of methods including energy consumption data and follow up environmental awareness surveys.

58. The funding source for expansion of the MPS corporate recycling scheme is still yet to be identified. Without further expansion of this scheme, the FMS suppliers are not expected to meet their contractual recycling target of 45% by the end of 2010. However, for non-office operational waste schemes the MPS has recently received positive press coverage regarding the use of seized weapons which are being recycled and turned into reinforcement for the building of the Olympic Stadium.

59. The MPS Director of Resources and Environment Champion, Anne McMeel has signed up on behalf of the MPS, to the Waste and Resources Action Programme (WRAP) commitment of halving construction waste to landfill. The MPS will monitor waste arisings and the reuse and recycling of materials on all construction projects with the aim of halving waste disposal by 2012.

60. In the 2005 Sustainable Development Strategy, the UK Government stated an ambitious goal to be amongst the leaders in the EU on sustainable procurement by 2009. It recognised that current initiatives alone would not deliver that. To this end the Sustainable Procurement Task Force (SPTF) was set up. The aim of the Flexible Framework is to enable all organisations both public and private to find their place on it. The view of the Task Force back in 2006 was that most public sector organisations had not yet reached a Level 1. The aim of the Task Force was that all public sector organisations would reach a Level 3 by 2009 and continue to improve to Level 5 by 2012. The MPS employed an external auditor to carry out a gap analysis on performance against the Flexible Framework, and the results were extremely positive we achieved an overall score of 93.6% reaching Level 5 (the highest score available).

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

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. Consultation and communication

1. This is an update paper only.

G. Environment/sustainability assessment

1. This is an update paper only and no issues are relevant to report.

H. Background papers

• MPA F&R 19th November 2009 - Residential Estate Strategy - Exempt paper

I. Contact details

Report author(s): Jane Bond, Director Property Services, MPS

For more information contact:

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

Abbreviations and acronyms

BOCU

Borough Operational Command Unit

CAMB

Computer Aided Modelling Bureau

CBRN

Chemical, Biological, Radiological Nuclear

CCC

Command, Centre, Communication

CCSA

Climate Change Action Plan

CO

Central Operations

CPS

Crime Prosecution Service

CT

Counter Terrorism

CTC

Counter Terrorism Command

DoI

Directorate of Information

DoR

Directorate of Resources

DPA

Directorate of Public Affairs

DVI

Disaster Victim Identification

EPBD

Energy Performance Buildings Directive

ESP

Estates Strategic Plan

FMS

Facilities Management Suppliers (from 2007)

GLA

Greater London Authority

IESE

Improved and Efficiency South East

LB

London Borough

MoE

Method of Entry

MPA

Metropolitan Police Authority

MPS

Metropolitan Police Service

MPSTC

Metropolitan Police Service Training Centre

NPIA

National Police Improvement Agency

ODA

Olympic Delivery Authority

OFT

Office of Fair Trading

OJEU

Office Journal of the European Union

OSG

Operational Support Group

PFI

Private Finance Initiative

PS

Procurement Services

PSD

Property Services Department

SCD

Serious Crime Directive

SLA

Service Level Agreement

SEL

South East London

SN

Safer Neighbourhoods

SN2

Safer Neighbourhoods Stage 2

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