The British Property Federation (BPF) today called on government to consider a raft of policy measures to support real estate, following the publication of a RICS report showing a significant decline in confidence, activity and investor interest in UK commercial real estate.
The RICS UK Commercial Property Market Survey for Q2 2016 showed that investment demand for commercial real estate has fallen sharply and that, although some immediate turbulence was to be expected following the EU referendum, the sector may in fact face a far more significant downturn. The BPF urged government to monitor the situation closely and consider introducing a package of support for the real estate sector, including:
- Accelerate its proposed reform of business rates to support activity in the broader business economy
- Delay the introduction of plans to restrict the tax deductibility of corporate interest expense for a year until 2018, to ensure that the rules are implemented in a way that doesn’t deter investment
- Introduce a range of tax reliefs for build to rent development, including CIL relief, relief for modular construction, and SDLT relief for new build to rent developments on the condition that they will be let on tenancies of three years or longer with rent increases tied to inflation
- Maintain an absolute and continued commitment to devolution and public infrastructure investment in HS2, the East-West Rail Line, Crossrail 2, and an imperative decision on growing airport capacity.
Ian Fletcher, Director of Policy (Real Estate) at the BPF, said “This is not the time for knee-jerk reactions, but commercial property and a number of the government’s priorities are interdependent. Ministers must closely monitor developments in the commercial property market and be ready to act in weeks, not months, if evidence continues of a slowdown in investment.
“Commercial property investment is not always an obvious priority for governments because its social and economic impacts are indirect, but construction and development activity flow from it, ultimately impacting on jobs and economic growth. In scenarios like this the focus is often on construction, but you don’t get construction without an investment client, so it is essential that government monitors fluctuations in investment very closely.”