The challenge ahead is no different to the one that has dogged the UK and other economies since Covid-19: how to invest in the country and get the debt burden down when the tax take is already high, and cuts in public spending are not culturally acceptable to a Labour Government.

From a property point of view the pre-election period was a typical one, with a heavy manifesto focus on housing and limited attention to commercial property other than a handful of comments on the business rates regime. However, what commercial property investors and occupiers need from the new Labour Government is pretty simple: stability and the environment in which to focus on growth.

The last few years have delivered a lot of reasons for investors and businesses to defer capital spending decisions. Some of these have related to the weak economy, others to the surge in borrowing costs, and some to a period of heightened political instability. With inflation returning to target levels and the outlook for GDP growth being for a steady recovery of the UK economy through the remainder of 2024 and into 2025, a stable and predictable political environment is the next component that investors and businesses are hoping to see restored.

The first budget of a new government is always more a statement of future intentions than any manifesto pledge, and we hope to get more clarity about taxation and spending when that arrives. Labour knows that it needs to deliver an environment in which economic growth recovers (not least because that is the least painful way to raise the overall income from taxation). Given the relatively narrow gap between the Labour and Conservative tax plans that were trailed pre-election, it is unlikely that this first budget will have too many surprises for the commercial sector.

As most commercial property decisions tend to be taken in the context of relatively long timeframes, a lack of surprises is probably the most important policy trajectory that we can hope for over the next five years. If political volatility becomes something that happens outside our borders for a while, we might even benefit from looking more stable than our peers to global real-estate investors, a factor that has often driven a rise in inward investment into the UK in the past. Prime yields in many sectors have already started to harden but, to date, investment activity has been held back by both expectations of recovery and the hunt for distress. With political matters resolved, the time to buy in the UK is likely to be now.

The Labour Party’s manifesto may have been titled ‘change’, and for many who voted for them the prospect of a break from the past 14 years has proved to be political catnip, however, for those planning medium to long-term real-estate decisions then boring may well be the best option.

Further information

Contact Mat Oakley

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