Leading industry body the Property Industry Alliance (PIA) recently released landmark research. According to PIA, the collective value of UK commercial property climbed to an all-time high last year.
British commercial real estate remains attractive to both domestic and foreign investors. Towards the close of 2015, research carried out by Propertydata suggested that UK commercial property investment would reach record highs of around £70bn. PIA’s recently released figures indicate that high investor demand sent the collective value of British commercial real estate soaring an all-time high in 2015.
Reaching new highs
PIA found that the value of the UK’s commercial real estate stock increased to £871bn in 2015. This is a new record, with the value rising by 11% on 2014 and so commercial property now accounts for 10% of this nation’s net wealth. Commenting, PIA Chairperson Bill Hughes was quoted by Business Desk saying:
“To put this in context, at £871 billion, commercial property’s value is the equivalent of 40% of the value of the UK stock market and almost half the value of UK government gilts.” PIA attributed the rise to higher rents, along with the values that investors were willing to pay in 2015 for a given rent.
In the report PIA also stated that last year, commercial real estate contributed roughly £68bn to the UK’s economy, meaning that this industry now accounts for 4.1% of the total national economy. Furthermore, the UK’s commercial property sector is directly responsible for one in every 35 jobs in this country, so it now employs nearly one million British workers. Speaking further, Hughes noted:
“This report demonstrates the property sector’s fundamental importance to the UK’s economy in providing an attractive asset class for investors of all sizes and for the funds serving the nation’s savers and pensioners. However, we believe more could be done in partnership with the public sector to unlock the wider social, economic and environmental benefits of commercial property investment and development.
“We would like to see more connectivity in planning for property and infrastructure investment. The synergies between, and benefits of, infrastructure and commercial property investment are clear, with undeniable links to UK housing, and we hope the Chancellor will signal a change of direction in his autumn statement to stimulate more activity in what has been an area of underinvestment over the past few decades.”
This echoes previous calls for Whitehall to stabilise the UK’s planning system. Research indicates that 73% of planners believe “constant changes” to planning rules have “hindered their ability to deliver good places.” This figure concerns housing planning, as the UK currently has a residential property supply crisis. But Hughes’ analysis suggests that the government needs to take a more comprehensive approach to this issue, to ensure that both the UK’s residential and commercial property sectors thrive.
With this report, PIA have shown that the British commercial property sectors continues to serve as an essential revenue generator for the national economy, due to high demand. As the decade rolls on, however, commercial property developers will face new challenges. Whitehall must confront these issues head on, to ensure that the collective value of UK commercial property keeps rising.