How is the upcoming election impacting the commercial property market and what will the future hold? James Evans from Halls Commercial shares his opinion.
The Prime Minister’s surprise announcement of a General Election in early July, has inevitably had an impact on the commercial property sector, as investors, occupiers and tenants may delay any transactional decisions. It allows a pause to consider their position, in view of a possible change of Government, and the subsequent differences it may bring in terms of policy to the property market.
Commercial property research, undertaken by Savills, suggests that transactional activity in the three months preceding an election is generally lower than normal, but recovers in the following six months, and there has never been a significant long-term influence on commercial property prices by a UK General Election.
The timing of the election was unexpected, particularly as a significant reduction in the rate of inflation is not expected to be announced before the polls open. Huw Pill, chief economist at the Bank of England, recently suggested an inflation rate cut for June was unlikely and it was anticipated the election would be called towards the end of the year, when economic growth is expected to accelerate, as interest rates falls and business activity levels increase.
As a result of the July date, investors are likely to retain income producing assets in the short-term, and would likely seek to sell once prices improve and market activity strengthens towards the end of 2024. The intervening period offers a time to review, refurbish or upgrade any property assets, to maximise returns, prior to disposal later in the year.
Chief executive of the British Property Federation, Melanie Leech, welcomed the announcement, saying: “Investors need certainty. An earlier election will give us that and is a golden opportunity to reset the relationship between the real estate sector and the next Government, as called for in the BPF’s manifesto ‘Building our Future’".
Which party will lead the country is yet to be decided, but the two leading contenders, have given an indication of their future plans should they be voted in.
The Conservatives have allocated £36 billion for a new "Network North" of infrastructure improvements, after announcing the cancellation of future phases of the HS2 transport project, with the Midlands, receiving £9.61 billion of investment to deliver the Midlands Rail Hub in full and to upgrade strategic roads, including the A50/500 corridor.
Levelling Up, Housing and Communities Secretary, Michael Gove, highlighted the Government's Long-Term Plan for Towns that proposes ploughing £1.1 billion of investment into 55 towns, including Wrexham and Wolverhampton.
Angela Rayner, Labour’s shadow secretary of state for levelling up, housing and communities, reaffirmed the party’s commitment to creating 'non-identikit' new towns recently, with the party unveiling a five-point plan in April to "transform the landscape of the UK’s high streets".
A key element is to replace the existing business rates system with a fairer framework of “business property taxation”, which should be of particular interest to commercial property investors, resulting they hope in a more level the playing field between traditional bricks-and-mortar businesses and online retailers.
What is clear though, is that whichever party comes to govern after the election, the regeneration and development of regional towns and their infrastructure is being prioritised, which can only be a good thing for the commercial property sector.
At Halls Commercial, we anticipate a short term pause and then business as usual, irrelevant of the colour that is elected. Bank lending confidence will return and people will then make property decisions based on long term political security.
Pictured: James Evans from Halls Commercial
