Priorities for new prime minister

After a period of uncertainty both domestically and globally, real estate decision makers will be looking to new leadership, first and foremost, for clarity. From a commercial real estate perspective, the announcements delivered over the summer allow us to divine a set of potential implications that fall broadly into three groups.

First, an ‘emergency budget’ is expected to address immediate economic challenges, most obviously a need to ease the pain of inflation and soften the consumer squeeze.

As part of this, measures such as a reversal of the recent national insurance rise and potential support mechanisms for households have been mooted, and while welcome, will have an indirect effect on commercial real estate.

Commitments not to introduce new taxes, to reverse the planned rise in corporation tax, and to remove green levies from energy bills are likely to have a more direct impact on business sentiment, and therefore commercial real estate, as would a suggested review of business rates. Taken at face value, the cost of these measures would be significant. Financial markets will therefore be alive to the possibility of a further weakening in sterling and rises in UK government bond yields – the former boosting the attractiveness of UK assets on the global stage, the latter at risk of raising the cost of debt to finance them.

Medium term ambitions include a broader desire to deregulate and remove or replace existing EU legislation. If done thoughtfully, this plays well to an international perception of the UK as a flexible and efficient market in which to operate, attracting global corporate and investment demand for commercial real estate. Specific industries, such as finance and insurance, have been mentioned in recent commentary, offering a further potential point of differentiation for the City and the businesses it is home to.

Longer term, there is a desire to raise the UK’s trend growth and productivity, through a mix of improvements to education, a focus on strategic growth sectors such as life sciences, and infrastructure investment. As well as offering opportunity for real estate development, leasing and investment in these specific sectors, this approach chimes with our research which shows that places which are home to strong innovation cultures are more economically resilient, and offer superior real estate returns.

With a new leadership strategy focused at its heart on economic growth, commercial real estate should have a fundamental role to play – the challenge for the sector will be to ensure that its suggestions and requests are heard amongst the many issues vying for space at the top of the new PM’s in-tray.