Regardless of your opinions on the Conservatives, last weeks largest significant victory in the general election brought a much-needed upturn to the overall confidence of the property sector.
While it is still early days in new governments reign, and a lot of judgement will be reserved until their manifesto pledges are met, the property sector overall has embraced the stability aspect of a majority government, with several high-value purchases being carried out in the wake of the Tory win.
To help understand the general consensus of the commercial property sector, Commercial People interviewed Shaun Dawson, Head of Insight at the UK’s leading occupier-only property consultancy firm, who revealed what’s next for the commercial property sector following the Conservative victory.
Commercial People: Hello Shaun, as DeVono Cresa is mainly an occupier-facing firm, many of our readers might be unfamiliar with DeVono Cresa, could you start by giving us an overview of what your role is?
Shaun Dawson: Sure, I am Shaun Dawson, Head of Insights at DeVono Cresa, and I have been in the prop research market for well over 15 years. I previously worked at Deloitte where I lead the real estate research team; At DeVono Cresa my role is to inform our clients and colleagues around whats happening in the wider market – whether that is economic property dynamics or anything political.
CP: Who are some of the clients you work with?
SD: We work with a wide range of clients including BDB Pitmans, whom we have recently acquired office space for. We also have also recently done similar deals for Deloitte, acquiring space for their tech division.
Another one of our recent clients was Investec asset management, who we acquired a building on their behalf at the beginning of the year
CP: What does the outcome of the general election mean for the property industry?
SD: On the back of this win, I would expect business confidence to be boosted somewhat.Following the conservative majority, many industries, including the property and finance sector, have seen a ‘bounce’- the question now is will this bounce stick or will it be short term?
First and foremost, the government has to live up to its manifesto policies, with number 1 on the list being to ‘Get Brexit Done’. With the majority that the Tories have, it seems very likely that they will try to quickly push through their withdrawal agreement – which should be inevitable given the large majority that they now have.
Once phase 1 of Brexit is done, then Phase 2 will be to try and complete the trade talks and map out the future relationship that the UK will have with Europe. Despite the current market positivity, Phase 2 of Brexit will mark another period of uncertainty, albeit with a different level of uncertainty than what we have seen over the past three years where the confidence in the UK’s markets has been rock bottom.
CP: Many companies, including the likes of Sports Direct and Fullers, believe that business rates require “Root & Branch Overhaul” – Do you agree and what does a Tory government mean for business rates?
SD: While businesses across most sectors saw a boost upon the results of the election, from a domestic policy perspective, there still remains a few questions from business about what a conservative government means – especially from retailers.
The current business rates system is one such question as the rates don’t match the modern-day way we do business; therefore, the rates need to be reviewed.
A rates review was suggested in the conservative manifesto – albeit in the form of short term rate relief for pubs, retail and other types of businesses on the high street. However, a more extensive review of business rates needs to take place, and I would suggest that it happens sooner rather than later.
CP: What would happen if the SNP referendum went ahead, and what impact would that have on businesses in the UK?
SD: When the 2014 Scottish referendum occurred, there was a lot of debate amongst businesses about whether they should base themselves in Scotland or England.
However, in a similar situation to Brexit, if you wish to operate your business within the EU, you need to be based in a country that comes under its jurisdiction. As a result, we have seen a number of firms setting up satellite offices within Luxembourg, Amsterdam and Paris, purely as a way to function in the event that of a ‘no deal’ Brexit.
As for a future Scottish referendum, a lot of it depends on what terms a potential independence is agreed on, as well as Scotland’s ability to secure EU membership. However, even if the SNP were allowed to proceed with an independence referendum, it would take several years to get membership status.
CP: Both Borris and the Transport secretary Grant Shapps have hinted that the high-speed rail service (HS2) to London & Birmingham as well as other parts of the network might be cancelled – What do you believe lies ahead for HS2?
SD: From what I understand there was a private review, in which some details were leaked, the leaks suggested that the initial route from London to Birmingham would continue to be built, while the rest of the line (towards Manchester, Leeds and Crewe) would be up for debate. Personally feel that HS2 will go ahead but with a shorter than initially planned route, with a decision made down the line to extend the rail.
CP: Impact of Tory victory on the commercial property sector
SD: Quite simply, I believe that it gives a bit of confidence and clarity [to the sector] as to the direction the government is going in.
One thing to remember is that we have had two years of a minority government, a government that has not been able to pass many of its policies through parliament.
As such, the instability and uncertainty has not given much comfort to businesses when making property-related decisions.
However, regardless of the cloud of political uncertainty, businesses have had to continue making these decisions.
Over the past two years, we have seen some of the highest leasing activity in central London, and we expect that to continue now that we have more clarity on the direction that the government want to take.
CP: Admittedly it is only early days into the Tories tenure, but continuing the theme of a majority government, what impact do you think a majority government will have on businesses?
SD: By having a majority government in place it can help to raise influence in the sector as you are virtually assured a sense of stability.
Stability & clarity are the two things that businesses are looking for the most. At DeVono Cresa we had some clients at the beginning of the year who were uneasy about the government’s direction and the unfolding of Brexit, as such, our client decided to pause and scale back their operations for the time being.
While I still think people will be cautious, I think there is a little more breathing space as a result of the general election.