After several boom years, commercial real estate now has a market value of £1,662 bn (€2.168 bn), representing just over a fifth (20.6%) of total net wealth in the UK. In 2010 it was worth £1,350 bn.
After several boom years, commercial real estate now has a market value of £1,662 bn (€2.168 bn), representing just over a fifth (20.6%) of total net wealth in the UK. In 2010 it was worth £1,350 bn.
CRE is also making a significant contribution to the economy, accounting for 5.4% of the country’s GDP in 2014 – a sum of £94.2 bn generated in rent. The new figures are revealed in a new report commissioned by the British Property Federation (BPF) and researched by Toscafund Asset Management, which was released on Thursday.
The report, titled ‘Britain’s Property CREdentials’, aims to highlight the importance of the sector to the UK economy and its role in supporting every type of business activity, in the belief that they are often not recognized, and also hopes to persuade the UK government to modify the currently ‘unbalanced’ taxation system. It points out that the retirement income of over seven million citizens is directly linked to the fortunes of the CRE sector, as many institutional investors have been attracted by the stable, long-term income it offers.
‘Given the substantial contribution CRE makes to the economy, to jobs, to regenerating our towns and cities, as well as the security it provides us through pension investment, it is in any government’s interest to promote investment in this sector through appropriate regulation, support and fair taxation,’ said Melanie Leech, chief executive of the BPF. ‘Housing is a key priority for Government, and rightly so, but to create sustainable communities there must be a balance of both commercial and residential property.’
One of the most positive characteristics of CRE is its flexibility, the report points out, as it allows buildings designed for one purpose to be easily converted into another and areas to be transformed, taking into account changing trends in technology, lifestyles and demographics. It makes a crucial contribution to the built environment, to development and regeneration, with a positive impact on the wider community – the 90-page report highlights many examples across the UK.
‘While income generation is hugely important and the most tangible output from CRE, we demonstrate that CRE brings value in many other ways, including the provision of a wide range of high-quality employment opportunities’, said the report’s authors, Savvas Savouri, chief economist at Toscafund and Richard Jackman, professor of Economics at the London School of Economics and Political Science.
The report argues that CRE is overtaxed because, being immobile, it is considered a soft target, and that this reduces the incentive to use assets efficiently. ‘You cannot ignore the fact that vacant premises not only generate no economic returns but they actually have negative consequences for the communities around them,’ said Dr Savouri. ‘We call for a more equitable taxation of property, a timely income-based approach replacing an anachronistic value-based one.’