Commercial property industry supports record number of UK jobs – LandlordZONE

Featured Sponsor

Store	Link	Sample Product
UK Artful Impressions	Premiere Etsy Store

Commercial property is an important part of the UK economy, but the retail and office sectors continue to suffer and rising interest rates present a real threat.

a recent report carried out by real estate consultancy, Lichfield, commissioned by the British Property Federation (BPF), concludes that the sector rebounded strongly in 2022. Coming out of the Covid pandemic, the sector has performed perhaps better than expected. expected, supporting a record number of UK jobs.

The BPF carries out an annual assessment of the UK commercial property market. This takes into account the economic economic performance of the sector: it looks at the jobs involved, the labor market, the production and turnover of the sector, the tax revenues generated for the government, and capital investment across the sector.

According to the report, the UK commercial property sector, either directly or indirectly, supported more than 2.6 million jobs in 2022. That represents, along the supply chain, an increase of 10% over Compared to 2019, the equivalent says the report of one in 12 jobs.

The BPF identified £137.5bn of annual economic output generated by the UK commercial real estate market (up 28% year-on-year and 18% higher than pre-pandemic) with a contribution to the Treasury through employment, transaction taxes and business fees. rising to over £42 billion by 2022.

Despite the difficulties that followed Brexit, Covid and the war in Europe, companies in the sector have continued to invest heavily, with total capital investment reaching almost £73bn and supporting more than 450,000 jobs. of work.

Melanie Leech, Chief Executive of the British Property Federation, said:

“The commercial real estate sector has proven its resilience and, despite a challenging economic outlook through 2022, now supports an even higher proportion of jobs across the country and contributes billions of pounds to the national economy.

“Businesses operating in the sector continue to navigate a combination of external pressures including construction cost inflation, interest rates and skills shortages in key areas. At the same time, they are fully committed to addressing the urgent need to reduce embodied and operational carbon emissions.

“This report shows what an important economic partner the sector is for government and the importance of ensuring that it works effectively in partnership with the public sector to not only stimulate growth and increase productivity, but also to create healthy and sustainable communities in the whole country”.

Crisis on Main Street

However, Britain’s high streets are still in turmoil, with nearly 3,000 store closures last year, and major independent and retail chains struggling to maintain sales revenue.

The cost of living crisis and inflation are not helping, but the root of the problem is much deeper. Out-of-town and suburban retail parks, in-town parking costs, online retail and delivery all have their part to play.

There is no easy solution despite the Government’s efforts to reactivate urban centers with its level up the schedule. There are other steps that can be taken according to Sirius Property Finance.

One of those measures could be the adjustment of commercial rates by introducing new cadastral values ​​based on figures taken on April 1, 2021, which would allow for the severe impact of the Covid pandemic on rental values. But, as the company points out, it may be too little too late as this measure does not account for the drop in retail rents over the same period, significantly reducing its effectiveness.

Smaller businesses and independent shops based outside of London are particularly affected. The evidence is stark: just over 500 stores and over 5,600 jobs have already been lost by 2023. While some of these may be transferred or replaced, some will be lost forever.

It’s a major problem for homeowners. When a property becomes vacant, all costs fall on the landlord, and if there is often a long period of vacancy. A lot of money is needed to overcome the crisis. When a commercial tenant leaves, the responsibility for commercial fees falls squarely on the landlord. There is a three-month exemption period for vacant stores, but after that, the owner pays full business fees.

That’s not all, the insurance also rests with the owner and when a unit is empty the premium can easily double due to the increased risk. Therefore, security measures may be needed and utility bills may also be paid.

During the current economic climate, when good tenants are hard to find and re-tenancy can be a lengthy process, the three-month qualifying grace period is too short. Extending this could make a big difference.

The government’s Leveling and Regeneration Bill is currently moving through Parliament, but its promises as a solution, giving local authorities more powers to take over any high street property that has been vacant for more than a year, it is not popular with homeowners. This would auction off vacant rental properties to the highest bidder, benefiting the local economy, but not necessarily in the interest of the owner.

Not an ideal solution to the high street crisis, many industry insiders think. Reform of the trade tariff system is seen by most as the most urgent and key action to save Britain’s high streets.

The logical solution, according to Sirius, is to provide tariff relief, with a long-overdue overhaul of the trade tariff system, he says. With commercial property currently accounting for around 25% of all business fees paid by UK companies, despite adding less than 10% to GDP, it all seems blown out of proportion.

Meanwhile, internationally

Rising interest rates pose greater risks for US banks. Business lending appears to be unsettling some US banks as interest rates threaten to rise to around 7%. JPMorgan CEO Jamie Dimon has warned that commercial real estate lending could cause problems for US banks.

The US banking sector is still reeling from its worst crisis since the 2008 financial crisis, but these difficulties are likely to continue, with JPMorgan & Chase CEO Dimon warning that the next problem to hit the US banking system could come from commercial real estate. real estate loans.

Higher interest rates, tighter credit conditions and the trend to work from home are creating job openings in the office sector. All of that is raising concerns about potential loan defaults by property borrowers in the US, and what happens there often carries over here, where interest rates will continue to rise as well.