Viewpoint: Budget 2016 analysis for the commercial property market

The commercial property market mustn't be spooked by the budget, says Andy Williams, founding partner at building consultancy Powell Williams.

Budget 2016

Initial reactions to the hike in stamp duty and high value leases have roundly warned of impending doom for the commercial property market in the UK. I'm not sure the impact will be quite as dramatic as some have predicted, but it may contribute further to the loss of appetite for some investors that we saw coming into play in the last quarter of 2015. Any knee jerk reaction could cause more of a problem than the actual realities of the measures announced by the Chancellor.

The Stamp Duty increase will only kick in for building acquisitions over £1.05million. For institutional investors and large-scale landlords, the extra levy is likely to encourage a renegotiation on price, but we were seeing that start to happen much more anyway as buyers feel the commercial property market has become overheated. But, as the UK and particularly London remains an extremely attractive place to do business, I don't think it will discourage investment. The knock on effect could simply be a need for the new owners to get more out of their buildings, and could put an upwards pressure on rents.

The Chancellor would be happy with that of course, as it would also benefit the revenue with regards his other announcement, an increase in tax on rents over £5million. Again, this is targeted at the very large firms with huge annual rental payments.

I think the impact on the large businesses which the government is targeting, will be a manageable inconvenience - after all the Stamp Duty levy is only expected to raise an extra £500m per year. The government has been very careful to set its thresholds at a point where the majority of smaller businesses will benefit, and the large businesses will be able to take the hit and pay more, but not enough to force them to think about leaving the UK as it's still better than the other major European centres.

Indeed, the biggest threat to the commercial property market in the UK is the uncertainty being created by the Brexit debate and general slowdown in the world economy. If there were to be a significant impact on investment it's not going to be because of these new taxes, but the economic armageddon of leaving the EU that will be to blame.

In resisting the chance to push up fuel duty, the chancellor has also done a favour for the commercial property market. Logistics companies have one of the largest appetites for space, so helping them to maintain and predict their costs should allow for continued investment in new and upgraded facilities which has been a trend of late. And it also gives a boost for those growing online businesses which are supplementing their large central hubs with smaller urban distribution sites to support their fleets of delivery vans and cars.

I really welcome the 'greenlight' for HS3 as the traffic and rail infrastructure problems between the North West and Yorkshire are a clear barrier to economic prosperity in the North. When it's faster and easier for me to get to London form Chester, than it is to get to Leeds or York, it discourages cross-Pennine commerce and affects everything from recruitment to business expansion. It's a shame the £60m announced is only to 'develop plans' as we'd really like to see them getting on with actually building it very soon.


Andy Williams Contact Andy Wiliams
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