UK property sector eyes govt move plans in Budget

* Up to 20,000 govt. posts "unnecessarily" based in London

* Manchester, Birmingham seen as cheaper alternatives

* Govt exodus could free up development space in City

LONDON, March 23 (Reuters) - Britain may unveil a number of public sector relocations in Wednesday's annual Budget as it fights to trim a ballooning national deficit by cutting real estate costs, property adviser GVA Grimley said.

The property consultant said many of the 20,000 public sector posts based close to the seat of power in London's Whitehall did not need to be there, racking up unnecessary costs in one of the world's most expensive office markets.

"Those 20,000 posts occupy approximately two million square feet of central London office stock, most of which is located in Victoria," GVA Grimley Head of Research Stuart Morley said.

He predicted a lettings boon for key regional cities as the government resumes a quest for cheaper real estate space following an earlier programme of relocations in 2007.

"Greater Manchester, Merseyside and the West Midlands will be among those regions that are likely to feature strongly during the relocation programme. The government's own Mayfield scheme will naturally place Manchester alongside the front runners for larger intakes of public sector posts," he said.

Last May, the government announced plans for a civil service "campus" at the abandoned Mayfield railway station in Manchester, which it said could house more than 5,000 public sector workers by 2014.

Philip Cooper, a director at government landlord Wichford's WICH.L management company, said a relocation of government offices away from Victoria did not necessarily mean the north of England would benefit.

"The other area that's worth looking at ... (are) places like Harrow, Croydon, Watford, (and) Bromley, which are not central London but are a lot cheaper than central London," he said of areas on the capital's fringes.

"The big difference there is that quite a lot of civil servants won't have to move. They might have a slightly longer commute," Cooper said.

LONDON FEARS

While relocations could boost other office markets, an exodus of government occupiers from central London may revive concerns for the prospects of its office market, which is just starting to rebound after a large banking sector jobs cull.

Latest data from CB Richard Ellis (CBG.N) showed office space availability in central London continued to tighten during February, with supply falling to 17.7 million square feet after peaking at 21.3 million square feet in June 2009.

Morley said the relocations from London offered more benefits in the long run, soothing a likely shortage of space over the medium term and uncovering development opportunities, given the number of freehold properties owned by the government.

"Strongest economic growth, and hence the greatest pressure on demand for office stock between now and 2013, will come in the three central London markets, City, West End and Docklands respectively," he said, explaining London's ability to absorb any short-term vacancy spike. (Reporting by Sinead Cruise; Additional reporting by Andrew Macdonald; editing by Simon Jessop) (See www.reutersrealestate.com for the global service for real estate professionals from Reuters)