Agenda item

Cabinet Member Ben Callard and Nick Keyse introduced the report and answered the members’ questions with Peter Davies.

 

As part of the introduction, Nick Keyse advised the Committee that, since publication of the report, a lease renewal has been successfully completed at Castlegate Business Park. The report had highlighted a risk associated with a major tenant whose lease was due to expire during the year, and that this had been included to illustrate the potential consequences if the space became vacant. He confirmed that this risk has now been mitigated, as the tenant – identified as the third?largest occupier at Castlegate Business Park – has signed a lease renewal, committing to remain on site for a minimum further period of five years.

 

How strategic is the Council being in its approach to assets such as Castlegate Business Park, and at what point do we stop considering it a strategic asset and instead recognise it as an under?performing one? Is it genuinely the right fit for the Council?

 

We recognise that Castlegate Business Park is a challenging asset and that it does not currently perform in the way originally intended. The format and configuration of the space can feel dated, particularly in a post?pandemic office market that has changed significantly. However, we also see strong strategic value in the asset, particularly because of its location and its potential role in future development, including its relationship to wider regeneration and planning ambitions.

 

Occupancy levels, while not yet where we want them to be, are moving in a positive direction. We must also balance pure financial performance with wider economic and community benefits, including employment and business support. Any long?term decisions about the future of Castlegate must be taken carefully, particularly in respect of existing tenants who provide local jobs and economic stability. For those reasons, we continue to treat it as a strategic asset while actively reviewing how best to maximise its value.

 

Are we confident that the benefits we are deriving from this investment could not be achieved more effectively by deploying that investment differently elsewhere, or by managing it in a different way? In essence, are we getting the best overall return – financial and otherwise – from this asset?

 

What distinguishes Council ownership is the ability to derive benefits that a purely private landlord might not prioritise or achieve in the same way. While our core objective remains to maximise occupancy and income, we are also able to use the asset more flexibly to support wider council and community objectives. For example, initiatives such as Monmouthshire’s flexible workspace offer have been delivered successfully at Castlegate and would be harder to sustain under a purely commercial model.

 

We have also been able to support temporary and community?focused uses of the site, provide more flexible tenancy arrangements, and align the asset with broader economic development objectives. While it is always right to ask whether investment could be redeployed elsewhere, we are confident that Council stewardship allows us to extract a broader range of benefits from Castlegate than would otherwise be possible, alongside a steadily improving financial trajectory.

 

How often are Council investments such as Castlegate formally reviewed, and how frequently are alternative or innovative approaches considered?

 

In practice, assets such as Castlegate are kept under very regular review. At an operational level, we hold monthly meetings with our managing agents, which focus not only on day?to?day performance, occupancy and enquiries, but also on market intelligence and comparable sites along the M4 corridor. This helps us understand whether performance issues are asset?specific or reflect wider market conditions.

 

Beyond that, we ensure assets are represented in the appropriate regional and strategic forums, including engagement with the Cardiff Capital Region, where opportunities for future uses, sector clustering and inward investment are explored. We have also tested our approach by engaging multiple commercial agents to review our terms and market positioning, and the consistent feedback has been that our offer remains competitive for an out?of?town business park. Taken together, this ensures that performance, strategy and future options are kept under continual review rather than being assessed on an infrequent or reactive basis.

 

What criteria would trigger a decision to dispose of an investment asset such as Castlegate Business Park rather than retain it for long?term income, and has the Council assessed whether releasing capital through disposal could better support core services than continued income generation?

 

We continually review investment assets, but any decision to dispose would be taken very carefully and would depend on whether we believe we have maximised the asset’s potential and whether disposal would genuinely result in a better overall outcome for the Council. In practice, assets are generally more attractive for disposal when they are performing strongly, rather than when they are under pressure, which is why our focus remains on improving performance rather than exiting prematurely.

 

In the case of Castlegate Business Park, it was originally acquired as a long?term investment, and we continue to see strategic, economic and employment benefits that extend beyond simple income generation. Disposing of the asset at this stage would also remove a revenue stream and could create additional pressures elsewhere in the Council’s finances. While capital release is always something we are mindful of, at present the recommendation remains to retain the asset while continuing to improve occupancy and performance and to reassess options once that position strengthens further.

 

On solar energy generation, has the Council expanded this approach elsewhere in the estate, for example through solar canopies or integration with electric vehicle charging, and is this reflected in improved returns?

Yes, we are actively expanding renewable energy generation across the Council’s estate. The solar canopy installation at Innovation House is part of a wider decarbonisation programme aimed at maximising renewable technology, future?proofing our assets and improving their attractiveness to occupiers. Integrating renewable energy, including solar generation and electric vehicle charging infrastructure, supports both environmental objectives and commercial appeal.

 

The financial uplift referenced in the report primarily relates to the Council’s solar farm, but all renewable installations across the estate contribute to long?term resilience and value. These initiatives are closely linked to broader sustainability goals and are increasingly relevant to tenants when considering occupation, particularly in terms of operating costs and corporate environmental commitments.

 

My understanding is that the current return on investment at Newport Leisure Park is around 1.8%, rather than the 2% originally planned. Are we therefore still below target, and should we be cautious about presenting this as a strong?performing asset?

 

Yes, the current reported return is around 1.8%, and we do acknowledge that this is below the original 2% target. However, it does represent a significant improvement compared with previous years, and it reflects a positive trajectory rather than a static position. Importantly, since the report was finalised, further leasing changes have occurred which mean that the projected return for 2026–27 is now closer to 2.4%, exceeding the original target.

 

While we are not complacent, we are confident that Newport Leisure Park is increasingly performing as intended, delivering a reliable income stream that contributes directly to funding Council services. Any assessment of performance needs to take account of market conditions, particularly in the leisure and retail sectors, and the fact that performance is improving rather than declining.

 

What additional opportunities are being considered for Castlegate Business Park, including potential uses such as expanded solar generation, transport or depot uses, or alignment with the Replacement Local Development Plan, and are local businesses being excluded from occupying space there?

 

Castlegate Business Park is a protected employment site, and there are specific planning use classes that determine what activities can and cannot take place there. Where businesses have not been able to locate at Castlegate, this has usually been because their proposed use did not align with those planning restrictions, rather than because we were unwilling to accommodate local businesses. We are also mindful of not drawing businesses out of town centres where that would undermine high?street vitality.

 

That said, we are actively exploring additional opportunities to maximise the value and utility of the site. These include potential renewable energy uses such as solar installations, consideration of electric vehicle charging infrastructure, and more flexible uses of existing space, including Council functions, training, and conference activity. Castlegate is also being considered within the context of wider planning and economic development ambitions, including links to the Replacement Local Development Plan, to ensure it remains strategically relevant.

 

Can you confirm that proper checks and balances are now in place to avoid previous issues around large?scale investment decisions, particularly the use of significant public funds, including investments made outside the county?

 

Yes, we can give that assurance. The Council’s approach to investment has changed significantly. Large?scale acquisitions, particularly those outside the county, are no longer being pursued. Oversight arrangements have also shifted, with the Performance and Overview Scrutiny Committee now playing a key role in scrutinising the performance and management of existing investment assets.

 

Decisions on investment, retention or disposal are now subject to clearer governance, stronger financial controls and transparent reporting. There is no active programme of comparable acquisitions, and any future proposals of that nature would require explicit, robust Member consideration and approval through the Council’s formal decision?making processes.

 

How are rental income and arrears monitored across the portfolio, and how long do we tolerate ongoing arrears before taking action or seeking a new occupier?

 

We have clear and structured processes in place to monitor rental income and arrears across the entire portfolio. Automated financial triggers are in place so that missed or late payments are identified quickly, prompting engagement with tenants to understand the reasons behind the arrears. This applies across all asset types, including commercial estates, county farms and major investments such as Newport Leisure Park and Castlegate Business Park.

 

Where arrears persist, decisions are taken on a case?by?case basis, taking into account the size of the tenant, the nature of the business and the wider economic context. In some instances, particularly where recovery is not possible, we will move to enforce lease terms and regain possession, as has previously happened at Newport Leisure Park. The overall approach balances commercial discipline with proportionality, but we do not allow unresolved arrears to continue indefinitely.

 

To what extent does returning Castlegate Business Park to profitability depend on existing tenants remaining in place, given that new tenants are often offered incentives such as rent?free periods or reduced rents? Does tenant turnover risk delaying a return to profitability?

 

The return on investment projections for Castlegate Business Park are based primarily on existing leases and known contractual positions. They do not assume any immediate rent increases from current tenants, nor do they assume that tenants without a contractual mechanism to leave will vacate. Where tenants do have break clauses or impending lease expiries, those risks are explicitly factored into our assessment.

 

It is correct that attracting new tenants can sometimes involve incentives, such as rent?free periods, and this can temporarily affect income. However, this is a normal part of commercial property management and is balanced against the longer?term benefit of securing stable occupancy. At present, the amount of vacant space—around 31,000 square feet—is significant but manageable, and it can be let either to a small number of larger occupiers or broken down for multiple tenants. Importantly, if we can reduce running costs through efficiency and decarbonisation measures, then even vacant space becomes less of a financial burden, improving the overall return profile while letting activity continues.

 

Paragraph 3.26 refers to Cardiff Capital Region (CCR) involvement and decarbonisation work, but the terminology is unclear. Can you explain in practical terms what this means for Castlegate Business Park and the Council?

Through Cardiff Capital Region, Castlegate Business Park has been selected as one of a small number of pilot sites for a decarbonisation initiative. The first phase involved feasibility work to understand how a large, 1980s?era office building like Castlegate could be decarbonised, recognising that it was not originally designed with renewable technology or energy efficiency in mind. We are now moving into a second phase that focuses on identifying an investment strategy to deliver those improvements. This includes measures such as improved building management systems, LED lighting and other energy?efficiency interventions. These works align directly with Council decarbonisation objectives, but they also have a clear financial benefit. Reducing energy and operating costs lowers our exposure where space is vacant and makes the building more attractive and affordable for tenants. While CCR is supporting the strategic and technical work, the aim is to deliver tangible outcomes that improve both sustainability and the financial performance of the asset over time.

 

Can we expect more concrete outcomes from the Cardiff Capital Region work to be reported back to the committee in future?

 

Yes. At present, much of the work has focused on feasibility and scoping, but as we move through the next stages we expect to be in a position to report more tangible progress. This will include clearer detail on what interventions are being taken forward, how they are funded and the practical impact on running costs and asset performance. We fully expect to bring that information back to Members as the programme develops.

 

Turning to the north of the county, the report notes positive developments at the Market Hall in Monmouth. With two new tenants moving in and museum storage still occupying part of the building, what is the longer?term vision for the remaining space once the museum vacates?

 

At present, part of the Market Hall continues to be used by the museum while refurbishment works to Shire Hall are underway. Alongside that, the vacant areas of the Market Hall are now being let, with tenants moving forward through change?of?use applications and fit?out preparation for new exhibition and commercial activity. This is already helping to re?energise the building and increase footfall.

 

Once the museum storage relocates back to Shire Hall – currently anticipated towards the end of the calendar year – we will have an opportunity to consider the Market Hall more holistically. The building is unique in its layout and potential flexibility, and our focus will be on identifying uses that both complement the existing occupiers and help drive activity into that part of the town. We intend to begin marketing the remaining space in advance of the museum vacating, to minimise vacancy periods and ensure we secure appropriate, high?quality uses that align with regeneration and town?centre objectives.

 

Chair’s Summary:

 

Thank you to the Cabinet Member and officers for the report and their responses today. It has been a very helpful discussion. The report was moved.