What can commercial property expect from the new government?

“Change begins now,” Starmer says, while Rishi Sunak concedes that Britain has delivered a “sobering verdict.” With Labour having surpassed the key 326 Westminster seats needed to form a government, the UK is experiencing its first Labour administration after 14 years under Conservative rule.

National renewal

The time for optimistic promises is over and the real work begins for the new government. The challenge ahead is no different from the one that has dogged the UK and other economies since COVID-19: how to invest in the country and reduce the debt burden when taxes are already high, and cuts in public spending are not culturally acceptable to a Labour government.

From the point of view of the property sector, the pre-election period was typical, with a heavy manifesto focus on housing and limited attention to commercial property beyond a handful of comments on the business rates regime. What commercial property investors and occupiers need from the new Labour government is simple: stability and an environment conducive to growth.

A week into Labour’s leadership, there have been a series of key announcements that may directly or indirectly impact the country’s commercial property sector. These could influence investment strategies and development opportunities to regulatory compliance and market dynamics.

Reforming the planning system

Labour’s commitment to reforming the planning system and reinstating local targets to build 1.5 million new homes over five years could streamline planning permissions, creating more opportunities for commercial property developments. This could lead to a boom in construction activity and provide a much-needed boost to the property market.

Brownfield site development

Starmer’s pledge to fast-track the approval of brownfield sites and release some “low quality” green belt land for housing could increase demand for commercial spaces around these new developments. This is potentially beneficial for investors and developers in the commercial property market.

Focus on social rented homes

Emphasising the construction of social rented homes and prioritising first-time buyers over investors might initially slow down some investment opportunities. Nevertheless, this could lead to more stable communities, indirectly benefiting commercial property by creating a reliable customer base for local businesses.

Mortgage guarantee scheme

Introducing a permanent mortgage guarantee scheme to aid first-time buyers could boost home ownership, likely increasing demand for retail and office spaces as new homeowners settle in. This influx of new homeowners could stimulate local economies and drive growth in the commercial property sector.

Leaseholder reforms

Labour’s plans to simplify and reduce the cost of extending leases and banning new leasehold flats aim to address unregulated ground rent charges, providing more security to investors. These reforms could make property investment more attractive by reducing uncertainties and long-term costs associated with leasehold properties.

Empowering renters

Banning no-fault evictions and empowering renters to challenge rent increases could create a more stable rental market. This stability can positively affect commercial landlords by providing more predictable rental income streams and increasing tenant satisfaction.

Expectations and uncertainties

The last few years have provided many reasons for investors and businesses to defer capital spending decisions. These have ranged from a weak economy and rising borrowing costs to a period of heightened political instability. With inflation returning to target levels and a steady recovery of the UK economy projected through the remainder of 2024 and into 2025, a stable and predictable political environment is crucial.

Labour’s first budget will likely be more a statement of future intentions than a fulfilment of all manifesto pledges. We hope for more clarity about taxation and spending. Labour knows it needs to foster an environment where economic growth can recover, as this is the least painful way to increase tax revenue. Given the relatively narrow gap between Labour and Conservative tax plans pre-election, the first budget is unlikely to have too many surprises for the commercial sector.

Targetfollow

At Targetfollow, we recognise the profound impact that market trends and political developments can have on the property market. Our team is dedicated to analysing these factors to make informed decisions and strategically manage our assets.

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