The commercial real estate sector’s economic contribution to the UK declined by more than 20% last year amid uncertain market conditions and cost pressures, according to the British Property Federation (BPF).
Melanie Leech, chief executive of the BPF
In its latest analysis of the commercial real estate sector, conducted by property consultancy Lichfield, the BPF analysed the jobs and labour market, output and turnover, tax revenue and capital investment across office, retail, industrial, logistics, leisure, medical and hotel properties, as well as build-to-rent and student accommodation.
The analysis revealed the sector contributed a total of £110.2bn GVA to the national economy in 2023, down from £137.5bn in 2022 and down from the £116.1m pre-pandemic level. This also accounted for 5% of the UK’s economic output, down from 7% in 2022.
The number of direct jobs supported remained the same, standing at 1.37 million in both 2022 and 2023.
The BPF accredited the decline to the decrease in capital investment. Last year, the sector invested approximately £60.5bn primarily in development and asset refurbishment. This represented a 17% fall in comparison with the £72.6bn invested in 2022 and stood below 2021 and 2019 levels.
However, last year commercial real estate was found to be a major contributor to tax revenues, generating around £3.9bn in transaction costs. The sector also generated a record £31.5bn in business rates.
Melanie Leech, chief executive of the BPF, said: “The commercial property sector is a major driver of economic activity across all parts of the UK and is a key partner for government in tackling the housing crisis, boosting regional economies and achieving net zero.
“This data underlines that after a strong post-Covid rebound, the sector faced significant economic headwinds in 2023 as well as challenges on the ground, including an under-resourced planning system.
“As we have set out in our General Election Manifesto, as the economy recovers there is a significant opportunity for the property sector and the next government to work together to find new ways of unlocking the private capital needed to deliver the homes, workspaces and local infrastructure we need to drive growth and productivity.”
