Will Commercial Property Go Out With a Bang ?

We are already two months into the last year of the decade. A decade which has seen so much happen in the Commercial Property world. What is in store for 2019? Investment in Commercial Property continued to increase over 2018 as did demand for Commercial Space.

CBRE David Egan comments “I think the market has outperformed this year, at least from user activity. There has been a general expectation for a number of years that this can’t continue, and it turns out that hasn’t been true. We have a massive amount of demand on the market for logistics properties of all types; obviously, the Class-A big-bulk warehouses are what gets most of the attention, but the demand is very broad-based and extending all the way down to secondary and tertiary markets,” he said. “My expectation in 2019 is that we should see more or less of the same dynamic.”

There will be a number of factors that could influence the Commercial Property Market in 2019, with the first being Brexit, that’s right, there appears to be no end to Brexit and its effects. The second is the ever-changing business models and therefore the changes to demand for certain types of space, people are more sceptical than ever and therefore nobody wants to tie in, particularly to office space. People in business are more inclined to share space and only use space when absolutely necessary, working from home is becoming a more attractive option and certainly a cheaper option for many businesses.

The third factor will be the tax changes for foreign investors that will be introduced from April 2019. KPMG comment “ From 6 April 2019, gains made on the disposal of UK commercial property by non-resident individuals will be liable for capital gains tax (CGT) at a rate of 20% and from 1 April 2019 foreign entities will be liable for corporation tax on the disposal of commercial property (which will fall to 17% by 2020).

The new rules also cover what is known as indirect disposals: selling shares in a company that owns UK commercial property. For an indirect interest to be caught under these rules the entity must be ‘property rich’.
‘Property rich’ is defined as deriving 75% or more of asset value from UK commercial property. In addition, the investor making the disposal needs to own 25% or more of the company’s shares, or have done during the previous five years.”

These three factors alone will affect the Commercial Property Market along with many others, it’s a bit of an unknown, if I were to place a bet it would be that the Commercial Property uptake will continue to increase over 2019, here's hoping.