2023 saw significant price corrections in the UK commercial property market. However, analysts are striking an upbeat assessment of the market for 2024 with opportunities for both long-term investors to acquire property at discounted prices and for tenant occupiers to obtain better terms when negotiating new leases or on lease renewals.
Will the 2024 commercial property market be a continuation of 2023?
The UK property market faced up to a challenging year during 2023 as investors dealt with a sustained period of high inflation and high interest rates, whilst tenant occupiers contended with an ongoing desire from employees for hybrid office working. There was some disappointment in the industry following the Autumn Statement as the much-speculated stamp duty tax cut did not materialise. As a result, 2023 saw relatively low volumes of commercial real estate investment as investors dealt with declining asset values and increased borrowing costs and at the same time many tenant occupiers sought to downsize their office space.
Analysts are increasingly positive that the market will begin to recover in 2024. CBRE have noted that whilst the interest base rate is likely to stay high in the first half of 2024, there is a real prospect of rate reductions in the latter part of 2024, which is likely to stimulate deals for both investors and occupiers.
What is the Government doing to support business?
The upcoming UK General Election is likely to have an impact on the commercial property market. With the Conservative party trailing in the polls, it is expected that the Government will announce the long-awaited stamp duty tax cut in the Spring Budget.
The recent Autumn Statement introduced changes designed to attract long-term investment into the UK, including proposals to clear the planning backlog and to allow full expensing on capital allowances. New investment zones are being rolled out in Greater Manchester, the West Midlands, the East Midlands, Wrexham and Flintshire with future further investment zones planned for the Northeast and Tees Valley. These zones will benefit from increased investment and additional tax reliefs that have been successful in existing investment zones such as Liverpool.
What opportunities are there for businesses in 2024?
With market conditions expected to improve in 2024, investors are seeing opportunities to acquire distressed assets at lower prices. The Israeli real estate investment group Ariomori is reportedly negotiating a deal to buy 5 Churchill Place in Canary Wharf from Cheung Kai Group for £110 million, representing a 60% discount from the £270 million the group paid for the property in 2017. The Financial Times has noted that the deal is likely to set a benchmark for pricing buildings in Canary Wharf, with other buildings including 20 Canada Square and the BCG office likely to go on the market this year. Similar trends are being seen across property sectors, with Savills noting that there are attractive opportunities for investors in offices, retail, life sciences, warehousing/distribution centres, and logistics.
Occupier tenants are also likely to see increased opportunities to negotiate discounted rents on new leases and on lease renewals as investor landlords grapple with vacancies, rising debt costs and falling values, with Savills noting that landlords will need stronger than normal levels of rental growth to support their investments.
How 3CS can help
Whether you are considering investing in commercial property in England or Wales or considering taking or renewing a commercial lease, our team of property lawyers and consultants can help you analyse your legal options in the market.
For further information or help with any legal commercial or residential property matter, please get in touch with your usual 3CS contact.
