Central Square

The WOL article about the retail units says they'll open in October 2019 but I'd be surprised if they didn't open this year, there are already planning apps in for Boots and Greggs signage and it would be a waste of rent for the BBC to leave them empty.

I know it's WOL so it's probably riddled with inaccuracies, but the article claims that the retail space is retained by Rightacres directly not subleased by the BBC. Not that this means it won't still make sense to open this October before they start demolishing St. David's House.

Point is that it won't be the BBC making anything from these retail leases, coupled with the fact that they'll now have a huge multi-million leasing deal hanging over them with the building owners, for premises, lest we forget, that are much smaller than their current Landaff site. Sure, it's all going to be shiny and new, but with them not owning their own budding, I can't see how any of this is a good deal for the BBC or licence fee payers. It's interesting that it's almost exactly like history repeating itself of the BBC Birmingham Pebble Mill to Mailbox move now universally hailed as a disaster.

The WOL article about the retail units says they'll open in October 2019 but I'd be surprised if they didn't open this year, there are already planning apps in for Boots and Greggs signage and it would be a waste of rent for the BBC to leave them empty.

I know it's WOL so it's probably riddled with inaccuracies, but the article claims that the retail space is retained by Rightacres directly not subleased by the BBC. Not that this means it won't still make sense to open this October before they start demolishing St. David's House.

Point is that it won't be the BBC making anything from these retail leases, coupled with the fact that they'll now have a huge multi-million leasing deal hanging over them with the building owners, for premises, lest we forget, that are much smaller than their current Landaff site. Sure, it's all going to be shiny and new, but with them not owning their own budding, I can't see how any of this is a good deal for the BBC or licence fee payers. It's interesting that it's almost exactly like history repeating itself of the BBC Birmingham Pebble Mill to Mailbox move now universally hailed as a disaster.

Are Rightacres retaining that part of the development then? I thought pension funds such as L&G were pretty much buying it all off them?

Well, according the the aricle; "Some 9,000 sq ft of ground floor space in the building, which will remain under the ownership of Rightacres, has been set aside for retail units."

But the important part is that it won't be the BBC, who'll now have a huge leasing bill hanging over them. Lest we forget the Mark Thompson vision that The BBC apparerntly needed to be visible and accessible to the public resulted in them kitting out The Mailbox in Birmingham, a completely inappropriate city centre "shopping mall" type bulding that they will never own. That resulted with a long minimum period lease agreement. Shortly afterwards BBC Birmingham was heailydowngraded and much of the office space and brand new studios ended up mothballed, but still being forked out to the tune of millions per year regardless.

Well, according the the aricle; "Some 9,000 sq ft of ground floor space in the building, which will remain under the ownership of Rightacres, has been set aside for retail units."

But the important part is that it won't be the BBC, who'll now have a huge leasing bill hanging over them. Lest we forget the Mark Thompson vision that The BBC apparerntly needed to be visible and accessible to the public resulted in them kitting out The Mailbox in Birmingham, a completely inappropriate city centre "shopping mall" type bulding that they will never own. That resulted with a long minimum period lease agreement. Shortly afterwards BBC Birmingham was heailydowngraded and much of the office space and brand new studios ended up mothballed, but still being forked out to the tune of millions per year regardless.

The BBC now have to pay a lease: correct. But there is nothing inherently bad about leasing rather than owning. In fact, most businesses lease. Why? Because it gives greater flexibility, a degree of insurance, and means those with a specialism in property investment handle that side of things.

Financially, if you own, you need to pay up front (either using your own cash or by borrowing and paying interest on that borrowing). Yes, you then own an asset which has some value (although note that commercial buildings tend to depreciate more than residential buildings).

If you lease, you pay on an ongoing basis. The money you have "saved" up front, could then be invested elsewhere. In your commercial activities, in other investments (stocks, bonds, other properties). So that money will still allow you to own assets which have some value (e.g. a better business, other investments).

The question comes down to whether the risk/reward is better from your asset being the building you occupy; or a broader set of investments.

So whether they are leasing the new space or owning it outright, isn't really the issue.

The issue is whether or not the BBC has done the right thing in selling off their old site, downsizing into more modern and efficient premises. There, I don't know. It depends on a bunch of numbers not in the public domain: the operating and refurbishment costs of their old building; the operating costs of the new ones; the broader 'value' BBC and the public obtains from its new building.

The BBC, as well as many other businesses hasn't got this flexibility you speak of though. It's not like their buidling requirements are that of generic office space, and it's not as if they can ever jump ship easily. It's taking 18 months to kit out this HQ, for example.

I think of badly run businesses like Woolworth, and their last death throes seem to be when they decide to sell their own bulding assets and lease them back to themselves. It reminds me of this. There can hardly be any doubt that if they're truly there long-term, it would be worth their while owning the building, and if they're not they've lost the chance to sell it as an asset.

And not withstanding that, the long-term lease agreements they're inevitably forced into doesn't give any degree of flexibility either; as with the case of BBC Birmingham's Mailbox fiasco and the amount of case they're still pointlessly shedding out.

I wonder how much they'll be paying out per square meter of office space in these city centre prime spots. I dare say it would pay for a lot of taxi trips to an out of town location.

I know you like to use Birmingham as an example of why leasing is bad, but that's just one example of BBC leasing. They lease a number of their offices, including Broadcasting House itself. Their main leases are Broadcasting House, Media Village (London), Media Center (Salford) and Pacific Quay (Salford).

As for the fact that they're moving to much smaller premises than before, that's true but their current site is only 66% used (space for 1500 staff, have less than 1,000 staff there). As their current policy is to only enter long leases in areas where they will clearly need permanent presence (i.e. London, Salford (North England), Glasgow (Scotland), Cardiff (Wales) then they clearly see a much better business case in long leases than they do in ownership.

You misunderstand me. I might be using BBC Birmingham as the obvious example, but that doesn't mean the other cases of the BBC selling thir original assets, relocating and from henceforth leasing their own HQs (often in prime spots) makes any sense.

Seriously, how long do you think The BBC is going to be located in some of these HQs? 20 years? Thirty years? Some of the cases you mention are even purpose built premises, not generic office space that they can relocate from.

The reason that BBC Llandaff is only 2/3 used is that they've moved various production staff over to Roath Lock - another leased premises(!)

I don’t see the issue here of the BBC not owning their new building. Other companies manage just fine. The company I work for have offices all over the world. Yes the building I am in they built themselves and own but the vast majority of their premises they don’t and they are doing just fine as they are.

It's not a question of whether they're doing "just fine" as they are. It's whether it's cost effective or not. The BBC will still be here regardless. And it's not cost effective to lease a building if you're going to be in 40 odd years.

Leasing is cost effective if you're after a bit of generic office space, or want a short-term establishment, but not if you're having a custom, new-build long-term, dedicated building. This is kind of so obvious that I wonder why people are arguing the toss; the building owner aren't doing this for charity, and it's not a magic way to get an expensive building built either. It's very much like the ridiculous idea of the NHS not owning their own hospital buildings a là PFI nonsense.

The counter argument to this is that by leasing office it leaves BBC management free to focus on their core activity of broadcasting - and if they were a private business they might also say it frees up capital.

(Just being devils advocate...)