Despite an upbeat Labour Party Conference in Liverpool, the Prime Minister, and especially the Chancellor, face a long and winding road ahead of them. Deep in the season of Budget speculation, the conference has given little away on how the Government is planning to address the worsening public finances while maintaining a fiscal headroom that will satisfy the gilts market.
Renewed commitments to stick to the Government’s manifesto pledge of not increasing income tax, VAT or National Insurance has put property industry professionals on high alert for upcoming changes. An anticipated reduction of the threshold for the High Value Council Tax surcharge – known as the Mansion Tax – could have serious repercussions from the residential market, but less speculation has been made of what changes could impact the commercial property market.
There the picture is cloudier, but with a reasonable account of the risks that the upcoming Budget presents, there are reasons for commercial property investors and landlords to remain hopeful of an acceptable outcome on the 30th of October, and for the market to continue on an upward trajectory.
For one, demand for office space remains high. The delay of development projects means that demand is outstripping supply, causing rising rental yields. While London is a prime example of this, Savills data show that this trend is acute in cities across the country. Its data showed that in 2025 prime rents rose by an average of 8.8% in the ‘big six’ cities outside London, with Leeds recording year-on-year growth of 18%.
The new Government has also been consistent in its intention to support the high street. On top of a swift move to cut business rates for pubs, social clubs and live music venues by 20% (effective from the start of the next tax year), the Prime Minister has also unveiled plans to revitalise the high street. A £210 million investment package includes £125 million for a Derelict Building Fund for which will help Local Authorities bring disused buildings back into commercial use. There’s also an allocation for local groups to acquire and preserve at-risk community assets - including commercial buildings.
For the commercial landlord and investor, these reforms - with some caveats - will bring more properties into the ecosystem and will help to reduce vacancy risks for many properties in their portfolios, especially in the leisure and hospitality sectors. The empowerment of local authorities to enact changes to aid local high streets and town centres also shows the direction of travel for ‘Manchesterism’, whose impact could sow economic growth in many underserved regions, thus increasing the potential for commercial property.
The path for commercial property certainly will not be a case of simple growth, and while there are reasons to be optimistic, it remains important to take a considered approach to investing in a difficult market. It’s hard to predict which regions and sectors will benefit the most from devolution - a policy directive which leaves more decisions in the hands of individual authorities and mayoralties. It also bears reiterating that the market is tied intrinsically to the state of the country’s business environment, which at a national level is currently defined by low confidence. Each investor ought to carefully consider what suits their own portfolio, based on their risk tolerance, the business sector of each unit and the region where they’re located. While this has always held true, that’s the best way to play it on the road ahead.
