Releasing capital as the market picks up

Whether the economy is firmly on the road to recovery, or still on the hard shoulder gathering speed, is still open for debate. What is not in question is that nearly two years of economic turmoil, and the very substantial current budget deficit, mean the availability of capital in the public health sector is scarce, and likely to remain so. However there are signs that the property market is returning and, if estates managers are going to take advantage by reviewing their accommodation requirements, now is the time. If a Trust’s health estates strategy document hasn’t been looked at for some time, it needs taking off the shelf and restructuring in the context of the current climate. One of the first things to consider is the cost and business case for any new development. These need to be very robust if they are going to secure funding and see the light of day over the next few years. However simply reducing cost and making any such project cheaper does not necessarily mean better. A far more comprehensive review should look at wider occupation costs, the consolidation of non-clinical functions, and the potential to make certain areas of the estate ready for sale – helping to offset the cost of new facilities. It is easy to think that there are few areas of healthcare estates left which could be utilised to release capital, but advances in technology, and outstanding models for back office systems such as finance and payroll, are making it less vital for these to sit alongside a clinical function in the same building. Consolidating such sizeable departments on a single site away from hospital buildings – possibly even outsourced to the private sector – could free up a number of buildings. Such projects do not come to fruition overnight, which is why building them into a longer-term strategy is crucial. The pressure on Trusts to free up land is hardly likely to decrease in the next few years, regardless of which political party is running the country. Also, remember that Foundation Trusts are able to retain the capital receipts from land sales, and reinvest them for their own requirements – subject to their terms of authorisation.

Academic partnerships

Thinking about the needs of the private or academic sectors is another way of shining a light on ways to develop, or sell, surplus land. In both London and Cambridge Trusts have identified a synergy between the property and accommodation needs of medical schools and colleges and their own clinical requirements. This perfect match suits both parties, and can help further strengthen the connection between a particular hospital and an academic medical department. But now is the time to decide that an estate needs re-evaluation. Consultants such as Drivers Jonas Deloitte can provide greater guidance the earlier we are brought on board to assess things. This forward thinking allows us to prepare a site properly and, if necessary, structure a planning application. Doing this helps us to create certainty for the site, and gives us a stronger proposition to attract developers and secure the highest possible price for the sale. The rule of thumb is that the more solid information you take to the market – on agreed usage etc – the more likely you are to get the deal you want. However, Trusts thinking about their own property requirements should consider the attraction of other sites, not just the land they have historically developed. With the property market still feeling its way out of recession, there could be deals out there which suit certain, often non-clinical, requirements.