UK General Election: Impact on Commercial Property

General Election Results: What This Means for the UK Commercial Property Market

Labour wins in a landslide in the UK general election – Keir Starmer will be the new Prime Minister.

“Change begins now,” Starmer says; Rishi Sunak says Britain has delivered a “sobering verdict.” Now that Labour has passed the key 326 Westminster seats needed to run the country – and outgoing Prime Minister Rishi Sunak has conceded defeat – what can we expect now?

In a nutshell: The UK will get its first Labour government after 14 years under Tory rule.

Labour’s Promises and Their Impact on Commercial Property

Reforming the Planning System

One of the key pledges from the Labour party is to reform the planning system and reinstate local targets to help build 1.5 million new homes over five years. This reform could streamline planning permissions, which may open up more opportunities for commercial property developments. However, such extensive development targets may also put pressure on existing infrastructure and resources, potentially leading to logistical challenges for commercial projects.

Brownfield Site Development

Starmer’s commitment to fast-track the approval of brownfield sites and release some “low quality” green belt land for housing can lead to increased demand for commercial spaces around these new developments. This could benefit both investors and developers in the commercial property market. Conversely, this policy might face resistance from environmental groups and local communities, possibly leading to delays and increased costs.

Focus on Social Rented Homes

The emphasis on building social rented homes and giving first-time buyers the chance to buy homes in new developments before investors could initially slow down some investment opportunities. However, it can lead to more stable communities, indirectly benefiting commercial property in those areas by creating a reliable customer base for local businesses. The trade-off here might be a potential decrease in short-term profits for investors focussed on quick returns.

Mortgage Guarantee Scheme

The introduction of a permanent mortgage guarantee scheme to help first-time buyers can increase home ownership, potentially leading to a greater demand for retail and office spaces as new homeowners establish themselves. On the flip side, this could lead to an overheated property market, driving up prices and making it harder for new entrants, both residential and commercial, to afford prime locations.

Leaseholder Reforms

Labour’s plans to make it easier and cheaper for leaseholders to extend leases and ban new leasehold flats will tackle unregulated ground rent charges, providing more security to investors and possibly stabilising the commercial property market. However, these reforms might face legal challenges from current leaseholders and freeholders, potentially creating a period of uncertainty in the market.

Empowering Renters

Banning no-fault evictions and empowering renters to challenge rent rises might create a more stable rental market. This can positively affect commercial landlords by providing more predictable rental income streams. Nonetheless, stricter rental regulations might deter some landlords from investing in the rental market, possibly reducing the availability of rental properties.

Expectations and Uncertainties

Prime Minister Keir Starmer and Chancellor Rachel Reeves, along with the new government, will face significant challenges such as the cost of living, government finances, and a complex global environment. While their policies aim to create positive changes, the impact on the commercial property sector will unfold as these policies are implemented.

The new Labour Government today faces the same challenge as the Conservative Government of yesterday so on that front there is no change. One of the few recent positives has been falling inflation and the likelihood of falling interest rates. That could be seen as an early ‘win’ for Starmer as PM, so hopefully policies in the short-term will remain on track so we have some economic stability.

Mark Richardson, Partner at BB&J Commercial

As the new Labour government begins to address these issues, BB&J Commercial will continue to monitor and adapt to the changing landscape, ensuring our clients are well-informed and well-positioned to navigate the evolving market.

Conclusion

The Labour victory marks a significant shift in the UK’s political landscape. While there are many promises on the table, the actual impact on the commercial property industry will depend on how these policies are executed. At BB&J Commercial, we are committed to helping our clients understand and capitalise on these changes. Stay tuned for more updates as we delve deeper into the implications of this political shift.

For more information or to discuss your commercial property needs, contact us today.

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