Q3 Property and Built Environment Economic Update seminar report

Important regulatory requirements were noted in the finance and taxation areas, while the latest market research highlighted key opportunities in the residential and commercial property sectors in London and the UK.

This ongoing CPD-certified quarterly seminar series from the IoD Property and Built Environment SIG has become an essential industry platform.

The IoD Property and Built Environment Special Interest Group (PBE SIG) continued its Quarterly Economic Update seminar programme with the third in the series, held on 21 September in the Barclays conference facility in Moorgate, London.

Attracting an audience from across the breadth of the real estate and built environment sectors, the event has become an essential industry platform for information delivery and establishing business connections.

The evening was chaired and moderated by PBE SIG vice chair, Perminder Ghataore (Managing Director of Finance House Solutions Ltd) while PBE SIG chair, Richard Nelson (Managing Director of Abyss Global Ltd), gave an overview of the IoD and the PBE SIG’s strengths and activities.

A high-calibre group of panellists for the evening indicated the value of the event:

• Neela Chauhan – Partner, UHY Hacker Young
• Rebecca Shafran – Senior Associate Director, BNP Paribas Real Estate
• Victor Bajela – Director, Savills

Coming off a week where the market had seen some good news, with data indicating a drop in inflation, the Bank of England holding interest rates at 5.25% and lenders lowering lending rates, the panellists provided a generally positive outlook, be it with a level of caution.

From a finance and taxation perspective, Neela Chauhan provided an overview on the current economic climate and the current regulations impacting real estate ownership. She also highlighted reporting requirements, especially for non-UK residential investors including the Registration of Overseas Entities (which confirms beneficial ownership), Registration of Trusts and Annual Tax on Enveloped Dwellings (ATED’s), which have all been introduced to improve transparency.

On the subject of taxation, it is essential that investors/owners seek professional advice in order to cover Stamp Duty Land Tax, Capital Gains & Inheritance Tax as well as Value Added Taxation.

Rebecca Shafran presented the BNP Paribas Real Estate view on residential markets and, despite some negative factors–such as a slowdown in UK job vacancies, the cost of living squeezing incomes and interest rates still at record high levels–the market remains resilient. House ownership is still an aspiration for many but the trend now is for buyers to seek purchases outside of city locations, a trend which is being aided by the continued move towards hybrid working.

The drop in housebuilding and high pricing in city locations is contributing to a highly active rental sector where demand continues to be high and rental values increasing in double digits. The latest research from Strutt & Parker, the residential arm of BNP Paribas Real Estate, showed that the key driver for rental property was a lifestyle choice in which people preferred to live in dwellings without having the responsibility for repairs and maintenance.

Other key drivers of the residential landscape are demographics, particularly looking at two key components: retirement living and student accommodation. BNPPRE/Strutt & Parker data points to the UK’s increasing older population, resulting in rising demand for the development of retirement communities which at present is experiencing a shortfall of nearly half a million units. In addition, university intakes continue to increase with both domestic and overseas students which has led to a swelling demand for high-quality purpose-built student accommodation (PBSA).

The view in the commercial sector, which was presented by Victoria Bajela from Savills, is based on data prior to the Bank of England’s decision to hold interest rates, therefore, it could well see a positive revision, but they are erring on the side of caution. The message was clear, and they still have a slightly downward view on the market.

The office sector remains subdued but underlying demand is good. Occupiers show an overwhelming preference for space with high ESG credentials, good transport links and personal safety. Well-appointed premises are highly sought after and clients are happy to pay double digital rental premiums for space which comes with a roof terrace despite the UK’s tendency for rainy weather.

Office occupancy is being driven by companies operating in financial services including insurance, media/tech and business consumers, all of which account for nearly 60% of demand.

Investment into the life sciences sector has rapidly increased since Covid and this has resulted in demand increasing across London and existing hubs in Cambridge and Oxford. Supply of good quality real estate in this sector remains an issue, so the expectation is that demand will spread to other localities.

Retail still has some issues, however, like in the hospitality sector, the falling sterling has encouraged an increase in tourism which in turn has pushed retail spending and hotel bookings above pre-pandemic levels.

The fourth in the 2023 series of Quarterly PBE Economic Update seminars is scheduled to be held on Thursday 7 December 2023, once again at Barclays in Moorgate. Details will be available on the IoD website and through the PBE LinkedIn page.

The IoD PBE Economic Update seminars are certified for CPD, typically awarding 1.5 hours credit for each event. Certificates are issued directly from the IoD.

The lucky winner of the chair’s champagne raffle for this event was John Muldoon, a member of the IoD, councillor for Rushy Green Ward in Lewisham and a communications, stakeholder and public engagement specialist.

If you have questions for the IoD PBE SIG, please email [email protected].

This is a guest blog written by Richard Nelson, Chair of the Property and Built Environment Group, and Perminder Ghataore, Vice Chair of the Property and Built Environment Group, which contains the views of the author and does not necessarily represent the views of the IoD.