What did 2023 hold for commercial real estate?
In January 2023, we published our article “What does 2023 hold for commercial real estate?”, which summarised some of the key predictions and legislative changes that were expected this year. After a very interesting 12 months we reflect on some of those predictions and changes and provide an update on where we are now.
- Market predictions
At the beginning of 2023 it was generally accepted that the year was likely to see a moderate economic recession. The first quarter of the year saw GDP growth at 0.3%, in the second quarter we had growth at 0.2% and in the third quarter we are likely to see no growth at all. Latest results and data therefore confirm that we have managed to avoid recession. However, the economy remains mostly flat-lined and recession in 2024 appears more likely than not.
- Overseas Entities
Any overseas entities that owned or leased (for 7 years or more) UK property must have registered their interests in such property with Companies House before 1 February 2023. Such information must be updated annually and so we will soon see a flurry of updates being filed at Companies House.
The Financial Times recently reported that more than 120 offshore companies had been issued with financial penalties so far this year, as they have failed to comply with the registration obligations. However, there is a much larger number of entities who have not complied and have also not yet been fined. It will be interesting to see how such penalties are enforced within the next 12 months.
Please see this article for more information.
- Energy Efficiency
Energy efficiency rules got tougher on Landlords in 2023. However longer-term measures that were expected to come into force in 2025 and beyond were the subject of a speech delivered by the Prime Minister on 20 September 2023.
Rishi Sunak announced that the Government’s plans for legislation requiring landlords to upgrade their buy to let properties to EPC band C by April 2025 for new tenancies had been scrapped. There has been much talk about whether the proposed MEES requirements for commercial lettings would also be delayed but no further guidance has been published yet, leaving commercial landlords in a bit of a grey area. 2024 is expected to bring further developments in this area.
Please see this for more information.
- Building Safety Levy
The Building Safety Levy was expected to come into force in Autumn 2023. However, the Government has yet to do so. The Levy, which will be imposed on residential property developers, aims to ensure that the burden of paying for fixing historic building safety defects does not fall on taxpayers or leaseholders.
There is not yet any update on where this levy will come into force.
- Empty Shop Auctions
The Levelling-up and Regeneration Bill finally received Royal Assent on 26 October 2023, with provisions under Part 10 to give local authorities the power to put empty high-street properties into compulsory rental auction. Such properties must be on a designated high street or town centre and suitable for high-street use. The premises must also be unoccupied and have been vacant for the whole of the previous year or for at least 366 days out of the previous two years.
Part 10 is not yet in force and further regulations will be published before this takes effect. However, there has already been concern raised by many that the Levelling-up and Regeneration Act as a whole does not deliver on what was promised and there remains uncertainty on how the Act will actually be implemented. The Government was also criticised for scrapping the northern leg of the HS2, and for removing the rules regarding nutrient neutrality from the final Act.
Assuming Part 10 is bought into force next year it will be very interesting to see to what extent local authorities exercise this right and whether this actually has the expected impact on our high streets.
For more information on BPE's Commercial Property offerings, please click here or email Doug Armstrong at Douglas.Armstrong@bpe.co.uk.
These notes have been prepared for the purpose of articles only. They should not be regarded as a substitute for taking legal advice.
