As we turn the corner and move into 2022, the UK’s commercial real estate sector is shaping up for a strong recovery amid a generally positive economic backdrop.
That being said, our sector does face a suite of new challenges as we enter 2022; office employers balancing productivity and safety; retailers face critical turning points in an evolving industry; residences competing for tenancy amid shifting migration patterns and heightened affordability concerns.
At HMA Tax, we believe that these new marketing conditions will provide unique opportunities for industry leaders within the commercial real estate sector to position themselves as a market leader as we move into the uncharted waters of ‘COVID normal’. Indeed, how commercial property owners proceed into early 2022 will set the foundation for its continued success over the next several years.
Here are the key insights from our commercial property tax specialists on the 2022 commercial real estate outlook:
Adjusting to new market realities.
Whilst the UK has been luckier than most, with commercial property incomes at some of the highest levels since the start of the pandemic, in other parts of the world, commercial property owners restricted ability to collect rental income has been creating a liquidity crunch. Combined with legal disputes there are some negative impacts on tenant relations. For commercial property owners, seeking pathways to reduce liabilities, be it through tenant negotiations, investments, tax incentives or otherwise will be an incredibly important in 2022.
– Tom Meredith, Director
Despite some financial concerns and an evolving regulatory environment, optimism around fundamentals prevails.
2021 saw some regulatory changes that will continue to support investment and economic growth within our sector. These include the 130% super deduction and a much needed delaying in the plan to reduce Annual Investment Allowance. We foresee that institutional revenues will be at better levels than those of 2022, and we hope to see further government interventions to support investment, jobs and growth that the commercial property sector.
– Duncan Chittick, Director
Most firms continue to depend on legacy technology systems, which could hamper progress and their ability to innovate.
Throughout the back half of 2021, we saw more and more companies substantially increasing investment in technology and assets to bolster their property portfolio and asset management capabilities. We have very little doubt this trend wouldn’t continue well into 2022, as proptech becomes more readily available for commercial property owners.
– Miguel Ramskill, Senior Claims Specialist
Many firms are focusing on retrofitting properties and repurposing spaces for alternate uses to maximise value.
With the rising cost of ground-up construction, we are starting to see property owners incorporate dynamic property design into new developments as well as retrofitting existing properties to add value. These changes provide an opportunity for properties to cater for the needs of current and future tenants, whilst also providing significant tax relief through embedded Capital Allowance claims for any qualifying assets within the body of works.
– Andy Milnes, Senior Claims Specialist
Sustainable properties are often key to a better tenant experience; building partnerships to provide new offerings to tenants can also enable real-estate-as-a-service (REaaS).
It really is a tenants market for those looking for commercial leases. If REaaS is to truly come to life in a post pandemic economy, developers and property owners need to starting thinking of it as a different revenue model to traditional real estate. Changes that impact upon tenants experiences, such as sustainable and efficient energies, dynamic building design and configuration, flexible leasing models and richness in amenity are all elements that could impact pricing structures for long term and short term tenants, particularly within the office space sector as we attempt to reignite our CDBs across the country.
– James Telling, Head of Developments and Acquisitions
About HMA Tax
As an award winning commercial property service provider, HMA Tax is continually evolving to adapt to new policy changes and industry practices to exceed our clients expectations and be at the forefront of the changing, commercial property landscape.
Our multi-disciplinary team of tax specialists and expert surveyors allows HMA Tax to provide services to our clients’ needs and to deliver these locally, nationally, and globally.
As a team of seasoned professionals, we can support you with deep knowledge and insight into the real estate, Embedded Capital Allowances and emerging industry trends.