The Ministry of Defence’s ongoing programme to reduce its property holdings has helped drive a reduction in the size of the government’s overall estate.
The Defence Estate Optimisation Portfolio – the MoD’s £5.1bn programme to invest in modern, greener and more sustainable infrastructure – was the main reason the number of buildings across the government estate fell by 1.2% last year, according to the government property function’s annual State of the Estate report.
Defence has the largest property portfolio in government, accounting for 100,228 of the 180,908 buildings across the government estate in 2023-24. However, this represents a 2.5% reduction from the previous year, when there were 102,822 buildings in the defence portfolio.
As part of the reduction, the MoD sold off 51 buildings last year, to the tune of £221.8m. “These disposals will help fund defence estate transformation and modernisation,” the report says.
The government’s portfolio of offices also shrank by 5.3% to 1,152 last year amid an ongoing push to consolidate office space. The Government Property Agency “played a central role” in this reduction, disposing of five office assets and generating £8.9m in proceeds, the report said.
A reduction in the number of jobcentres operated by the Department for Work and Pensions – from 825 to 761 – also contributed to the estate’s shrinkage last year. The 7.8% reduction was a result of DWP closing jobcentres it had opened at the start of the Covid pandemic in 2020 through its Rapid Estate Expansion Programme.
By contrast, the health portfolio has grown by 1.2%, to 7,400 primary, secondary and community healthcare facilities, as NHS trusts have grown their estates to meet demand.
There was also a “modest” 1.9% increase in the logistics and storage portfolio, which held 596 buildings in 2023-24. The Department for Transport and National Highways contributed to this growth as they acquired sites such as motorway service compounds and vehicle depots to support operational needs, according to the report.
And there was a 2.1% increase in the number of prisons – from 383 to 391 – reflecting the Ministry of Justice’s efforts to grow the number of prison places.
Conversely, there was a small (1.2%) reduction in the probation portfolio from 500 buildings to 494.
While the trimming down is slight, there has been considerable change in this area, with nine new acquisitions offsetting the removal of several sites that were operated by private Community Rehabilitation Companies before they were returned to public control in 2021. The changes also reflect a drive to “align more closely with the Government Property Strategy by replacing older freehold properties with newer, more efficient and sustainable leasehold properties”.
Government estate value and running costs rise
While the number of buildings owned or leased by public bodies shrank last year, the value of the overall estate grew by 5.6% to £191.5bn – driven by the health, school and prison portfolios.
There was also an 8% increase in running costs across the whole of the government estate, which hit £25.6bn in 2023-24.
The health portfolio accounted for much of this increase, costing £14.3bn to run in 2023-24 – 6.2% more than the year before. The report notes that cost pressures “have intensified” since many of the facilities-management contracts are linked to inflation.
Despite its reduction in size, the defence portfolio’s running costs grew by 10% last year to £3.3bn. This is down to the Future Defence Infrastructure Services core accommodation contract, reflecting a mix of increased investment in Service Family Accommodation, inflationary increases and efficiency measures.
However, DWP’s disposal of jobcentres meant their running costs fell by 12.2% to £458.4m.
The 5.2% increase in running costs across the prison portfolio – to £1.1bn – was driven by both inflation and “a continuing pattern of investment across the prison estate, with a focus on investing to improve conditions and performance through local initiatives linked to agreed spending priorities – for example, on safety, decency and security”, the report said.
The report also noted a 4.9% increase in soft facilities-management costs across the prison estate because of the need to conduct “urgent” reinforced autoclaved aerated concrete assessments.
The biggest proportional increase in running costs was in the logistics and storage portfolio, which cost £70.4m to run – 14.6% more than in 2022-23.
This was largely down to spending on maintaining and securing “critical storage facilities”, the report says. The 11 new buildings in the portfolio included sites acquired by the Home Office and the Maritime and Coastguard Agency to enhance the Emergency Services Mobile Communications Programme – leading soft facilities-management costs to more than double and security costs to rise by more than a third.