Agenda item

Report of the Assistant Director for Housing. To be introduced by the Cabinet Member for Council Housebuilding, Placemaking, and Local Economy.

Approval of the decision to appoint a commercial property management provider to manage the Enterprise Hub at 40 Cumberland Road following a competitive open tender process.

The Cabinet Member for Council House building, Placemaking, and Local Economy introduced the report which sought approval of the appointment of a specialist commercial property management services supplier for 40 Cumberland Road (“Wood Green Enterprise Hub”) for a period of three years, with options to extend by a year, and a subsequent option to extend by a further year, as an interim measure which would enable the Council to develop its capacity to self-deliver workspace.

The Cabinet Member outlined the following:

-       Delivering the Wood Green Enterprise Hub project at 40 Cumberland Road presented a unique opportunity for the Council to support local businesses and enterprises through the creation of workspace.

-       There was increasing demand for workspace to support local SMEs, as well as a need to provide opportunities for growth. The Enterprise Hub would not only protect the existing 3^rd and 4^th floor occupiers in the building and provide space for new occupiers, but also transform an underutilised building into a hub for local people to access events, culture and networks.

-       The Enterprise Hub would enable the Council to demonstrate its commitment to the delivery of workspace for local businesses through its own property by leveraging external funding, and in doing so secure social value outcomes for the people and businesses of Wood Green, now and in the future. It would also enable the Council to develop an innovative self-delivery approach for future workspace across the borough.

In response to questions from Cllr Emery, the following was noted:

-       Regarding, the balance between the commercial and the affordable rent occupiers in terms of the rent collection, the first two floors were occupied by artists of varying degrees, and they would remain as tenants on those floors. Then the Council would be seeking to offer some commercial rentals and some subsidised rented space to allow the building needs to be met and for it to be able to maintain itself. There would be some grant funding and the management would be able to ensure that there is a fit out on the other floors, which would also provide some ground floor event space as well, which would be a useful addition to the area.

-       With regards to the expected spend in order to build up the capability to manage properties such as this one in the Council’s portfolio, this was part of the property recruitment and the resourcing plan which the Property service would need to build a full business case around. There was existing capability within the team, and this was a capacity issue at the moment and relied upon moving and shifting projects going forward.

Further to considering exempt information at item 26,

RESOLVED:

To approve the Authority entering into a services contract with a third-party supplier to provide commercial property management services for 40 Cumberland Road for an initial period of three years, with options for extension to a total duration of up to five years from the commencement of the contract.

Reasons for decision

It is a longer-term ambition of the Council to build its capability to successfully manage modern “workspace” environments on Council properties (such as 40 Cumberland Road) in a self-sufficient manner which maximises the property’s local impact and benefits. The Council does not currently have this capability. As such, it is proposed that the Council will appoint a suitably skilled and experienced commercial property management services supplier to manage 40 Cumberland Road over an interim period whilst the Council seeks to build its own internal capabilities in this area.

This approach is in line with ‘Opportunity Haringey’ which was adopted at Cabinet in November 2023. Opportunity Haringey is Haringey Council’s new inclusive economy framework. The Opportunity Haringey vision is to create a fairer and greener local economy that builds on local creativity to harness Haringey’s strengths. It has been developed through listening to residents and businesses. It sets out how the council will work with local and strategic partners to create an inclusive, more resilient local economy where local businesses can grow and thrive and residents benefit from rewarding, well-paid work. The framework has five themes, one of which is ‘Work Places and Spaces’; with which this project aligns.

It is proposed that the commercial property management services supplier is engaged for an initial three-year period, which will allow 40 Cumberland Road to become fully operational and develop a community of occupiers across the property, before a process takes place for handing over the management of the property to the Council’s in-house team which will manage this property and potentially other Council commercial properties across the borough. There will be the option to extend to the contract with the supplier for a fourth year, and a subsequent option to extend the contract with the supplier for a fifth year, should it be deemed beneficial. The contract will therefore have a maximum term of five years

The successful supplier was selected following an open procurement process, managed by the Council’s strategic Procurement team, which concluded on 18th December 2023. As well as written submissions, tenderers were also scored on clarification presentations, given to the evaluation panel. The panel was made up of officers from Property, Regeneration and Economic Development team.

The procurement tender pack included a fully drafted services contract, so as to ensure that bidders were aware of the legal / contractual requirements. Changes to the contract can be made only via the change control process outlined within the contract, and only once it has been entered into by both parties (successful supplier and Council).

Should the outlined approach be successful, it could provide a model that could be replicated in other Council commercial properties to activate and optimise vacant sites and inform wider property strategy.

The commercial property management services at 40 Cumberland Road will include several statutory and legal duties in addition to supporting the occupier community and delivery of social value outcomes. The commercial property management services supplier will be responsible for a number of activities such as planned and preventative maintenance of the building, collecting of occupier fees such as service charge and licence fees, and ensuring compliance in matters such as fire safety, health and safety, maintaining appropriate insurance etc.

The Council has external capital grant funding available which will enable the fitout improvements of 40 Cumberland Road to provide an exciting new workspace environment. The Commercial property management services supplier will support this process. They will feed into the design and delivery process, support existing occupiers and work on pre-letting and management plans to ensure a swift transition to operation following completion of construction.

Existing occupiers of the third and fourth floors entered new license to occupy agreements in August 2023. They will be impacted by the change in management arrangements. However, it is anticipated that this will be a positive change, with a dedicated organisation in place to contact to discuss issues, faster response times to repairs and a clear understanding of the operation of the building. This change will be managed through sustained engagement with these stakeholders and nurturing the relationship between the commercial property management services supplier and the occupiers. A high-level overview of the new approach and upcoming changes have been communicated to the occupiers, with more detail to be provided as and when approvals are granted.

The officer recommendations set out in the report take into consideration the below factors:

- the time required to build an in-house workspace management team

- the opportunity for learnings that can be obtained through contracting with an expert commercial property management services supplier.

This approach will seek to reduce delivery risk to the Council as it assumes an intelligent client role. Alternative options are explored further in Section 5.

The Council will maintain a direct legal relationship with existing occupiers, via occupation agreements (licences and leases). The revenue from occupier fees is intended to cover the costs of commercial property management services and third-party service provider costs (that the commercial property management services supplier would source), e.g. for facilities management related costs. All surpluses would then be retained by the Council. The Council will have a clear, detailed services contract with the supplier.

The deliverables of the contract with the commercial property management services supplier will include (but are not limited to): a. Property management plan; b. Planned and preventative maintenance plan; c. Health and safety compliance plan; d. Marketing and letting plan; e. Financial plan; f. Progress reports; g. Executed occupational agreements; h. Systems and set up of software to provide the services; i. Finance transferred to the authority; j. Handover plan; and, k. Third party service providers agreements and invoices.

The scope of activities of the commercial property management services supplier includes (but are not limited to): a. Occupier management – day-to-day management of occupiers including: develop and deliver a robust property management plan; develop and deliver a marketing and sales plan; on-site presence; lead processes with occupiers and facilitate legal occupational agreements; coordinate occupier meetings; curate the customer mix to benefit the building and local area; communicate with occupiers and be their main point of contact. b. Financial management and reporting – Develop and perform against an annual and five-year plan; income collection; debt and arrears management; efficient management of third-party services & invoice settlement; provide performance reports / open book accounting and meet with LBOH (leading key performance indicators will relate to compliance monitoring, occupier feedback, income and occupation rates). c. Facilities management – Contracting with, managing and paying utility and facilities suppliers; soft and hard facilities management; event and meeting room management. d. Animation of the property – Facilitating networking and encouraging collaboration between occupiers and other local organisations; ongoing provision of studios for creative micro businesses on upper two floors, enabling creative anchor tenant Alexandra Palace to utilise the ground floor, facilitating business support; enable providers of social value to carry out activities at the property such as events, workshops etc. e. Handover to the Council – Working with the Council to develop its in-house capability to support future management of this and other similar properties during the contract term, and handing over management of the building at the end of the contract term

In advance of the tender being formally issued in December, a market warming exercise took place in early September for the commercial property management services contract, resulting in interest being expressed from several organisations. This exercise included providing information to interested parties to register on the Council’s procurement framework.

Major Projects are manging the design and fit out works for 40 Cumberland Road. These works are jointly cliented by the Wood Green Regeneration and Property teams. The design team is being managed by architects Assemble and QS services are being provided by IKS. The fit-out contractor is yet to be commissioned but Major Projects have added approval of the successful contractor to the cabinet forward plan for spring 2024.

Alternative options considered

Officers considered the following alternative options to manage 40 Cumberland Road and achieve the ambitions for the property as set out:

Council Direct Delivery of Whole Site in 2024: The Council currently provides facilities management and wider property management to 40 Cumberland Road, which mainly involves managing the upper two floors of occupiers, and provision of repairs, cleaning, maintenance and security. While deliverable, it is resource intensive. The level of resource required will only increase as the building is developed into a fully functioning workspace environment. It is unlikely that LBH would be in a position to mobilise a full team on the opening of the Enterprise Hub, due to timescales and challenges associated with within the property profession. Failure to deliver within the time constraints or meet service level requirements would have a repercussions on the financial return that the Council can expect.

Council Manages Occupiers and Appoints External FM Management: This option would involve a split of responsibilities between the Council, who would manage occupiers; and a third-party supplier who would undertake facilities maintenance duties under a services contract. The time to implement the services contract would be similar to the Property Management Services Contract due to legal and procurement rules. In this case, the Council would need to be highly diligent as client, as the management of the property and the facilities would be separated. This would cause complexities including an impact on the occupier experience, higher level of Council resource required to manage the site, and risks around communication and the loss of synergy and economies of scale in delivery. Overall, the cost of delivering Property Management directly and facilities management via a supplier is likely to reduce the financial return.

Do Nothing: The responsibilities associated with property ownership mean that not providing services to the building is not an option. The Council has statutory and legal responsibilities to ensure that the building is safe and being used appropriately. The longer-term cost of implementing occupational agreements and not providing services or management will be significant reducing the overall return.