Commercial real estate (CRE) represents over a fifth (20.6%) of total net wealth in the UK - worth a staggering £1,662bn.
New figures, released in a Toscafund report commissioned by the British Property Federation (BPF), also show that CRE contributed £94.2bn (about 5.4%) to the UK's GDP in 2014 and that construction work between 2002 and 2014 has on average employed 2.1 million people (6.8% of the UK’s labour force).
The report goes further than demonstrating the sector’s economic contribution, highlighting how CRE is intrinsic to our lives and businesses. It illustrates how the sector encompasses everything from transport and infrastructure, to universities and private rented housing, and the important role it plays in creating sustainable communities and supporting every type of business activity.
The BPF is calling on Government to recognise how CRE creates the physical fabric of the towns and cities that we live in, and to work with the industry to ensure that it is subject to fair and appropriate regulation and taxation.
The report also shows how there are over seven million UK citizens whose retirement income is directly linked to the fortunes of the CRE sector. Institutional investors such as pension funds invest in the CRE sector as they are attracted by the stable, long-term income and flexibility that it offers.
Melanie Leech, chief executive of the British Property Federation, said: "Many people associate commercial property with offices or shops but as we can see in this report, it is so much more than that. It is your doctor's surgery, your child's university accommodation, the train station you go to every morning.
"Housing is a key priority for Government, and rightly so given the acute challenges that this sector currently faces, but to create sustainable communities, there must be a balance of both commercial and residential property.
“Given the substantial contribution CRE makes to the economy, to jobs, to regenerating our towns and cities, as well as the security it provides us through pension investment, it is in any Government's interest to promote investment in this sector through appropriate regulation, support and fair taxation.”
Dr Savvas Savouri, chief economist at Toscafund Asset Management and author of the report, commented: “CRE takes on varied and economically valued forms across all of the UK and it would be no exaggeration to say that the fortunes of the UK economy turn on a well functioning CRE market.
“To assume that CRE can be considered a soft-tax target because it is immobile, is to ignore the fact vacant premises not only generate no economic returns, they actually have negative consequences for the communities around them. The call for more equitable taxation of property simply asks that burden should be proportionate to ability to pay; a timely income based approach replacing an extremely slow to adjust and anachronistic value based one.”
Chris Taylor, chief executive officer, Hermes Real Estate and President of the British Property Federation, said: “Apart from purely quantifying the property industry’s financial importance to the UK economy, it is important for Government to understand that our industry acts as a pivotal conduit for sustainable growth, implementing regeneration and contributing towards a more balanced and productive economy.
“The BPF has been keen to ensure Government appreciates the broader qualitative importance property can play too in our society by responding to profound changes in demographic lifestyle patterns, urbanisation, technology and globalisation trends which all shape how people elect to live and work in the future.”
