The general election is done and a new government is in charge. What does this mean for the commercial property market? What can investors expect of key sectors and where should they be looking to put their money?

So far, 2024 has been a brighter year for the commercial property market, although growth has remained relatively limited, with economic and political instability significantly slowing any forward momentum. However, with Labour now in power and promising key reforms and investment related to the commercial property space, sentiment is improving, with forecasts shifting accordingly.

What’s ahead for the logistics and warehousing space?

In recent years, despite some serious market headwinds, logistics and warehousing has proved a rare source of reliable growth and while the sector is showing signs of maturing, it remains resilient and its key role is set to continue.

A move for mega-size deals has been a key trend in this space in 2024, with Nike and Greggs among investors, and this is expected to continue to the end of the year and beyond as companies look to future-proof their supply chains in an environment where a lack of quality space remains an issue. At the same time, prime market location is only set to become more integral in terms of defining market development.

Notably, with Colliers signalling that around 4 million sq. ft of logistics and warehousing development is scheduled to be completed in 2024, the prospects for this space look good into and through 2025.

Where should investors target in office space?

As for another market mainstay, the office sector is showing signs of improvement but growth is clearly segmented. Opportunities are focused on high-quality core office space, while second-hand properties remain challenging. In this sector, much depends on what happens to interest rates going forward.

Crucial to development in office space, and other sectors, is sustainability and the government’s plans to accelerate the transition to a green economy should have a notable impact. Space with strong environmental credentials is already a stand-out area for investors and new policy is only set to increase the focus on stock that meet stricter environmental standards.

Where are the hot spots in retail and residential?

Similarly, the outlook for retail remains mixed. Sentiment is changing around the sector, but performance continues to be muted. Sustained economic stability will help this market but it may be some time before serious growth returns. Prime shopping centres and retail parks are set to remain the growth spots.

Residential continues to offer opportunities, thanks in part to ongoing demand and a shortage of supply. However, investors will need to tread carefully. The sales market is looking brighter but the rental market is more subdued, with affordability issues likely to make rental increases challenging.

Which smaller sectors offer bigger profits?

Away from the market bigger hitters, life sciences continues to perform healthily, although a lack of available space serves as both a drag on growth and a signifier of future potential. New industrial strategy from the government, which includes an improved planning system, should provide a fillip to a number of sectors, including life sciences. Both purpose-built and repurposed sites should be attractive.

In a similar vein, purpose-built student accommodation remains buoyant, with robust demand for higher education a key driver. A change in law restricting activity relating to non-purpose-built accommodation should only reinforce the performance of this subsector.

A changing economy and your commercial loan and mortgage provider

Overall, post general election, there is more positive talk around the commercial property market, not least as the market reacts to the prospect of a sustained period of economic and political stability and a tranche of key market reforms.

However, economic conditions remain uncertain, not least in relation to interest rates and inflation targets. For investors, plotting a forward course requires careful planning and key insights.

Notably, integral to moving on opportunities is access to finance and this is why your choice of commercial loan and mortgage provider is crucial. Ease of access to finance as well as flexibility and affordability remain essential going forward.

To find out more about A&T Business Associates services for commercial property investors, contact Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.