What Budget Means for the Ever-Evolving Corporate Real Estate

What Budget Means for the Constant Evolution of Corporate Real Estate


With the passage of a new budget, the economic landscape remains difficult for businesses. The economy has spent most of 2023 on the brink of recession, consumers are still feeling the squeeze, and the tax burden is at its highest in 70 years as the UK seeks to repay the huge public spending incurred during the Covid pandemic. Add to that all sorts of constraints on the global supply chain, geopolitical uncertainties and a volatile energy market, and it's easy to see the complex mix of challenges business leaders face in 2024 and beyond. -of the.

Economic and real estate prospects for businesses in 2024

The budget has not significantly changed the situation for most businesses. The corporation tax rate remains at 25%, with a rate of 19% on profits up to £50. However, the full 000% depreciation regime has been extended to include rented assets, which will benefit construction and equipment rental businesses. Even more optimistic, the budget announcement confirmed that inflationary pressures are beginning to ease. Many consultants and forecasting organizations now see glimmers of hope at the end of the tunnel. CBRE, for example, expects inflation to fall back to the Bank of England's 2% target by early 2025, allowing cuts in interest rates supporting real income growth and easing the burden of corporate debt. This in turn will help a stagnant economy start growing again.

ESG momentum is gaining momentum

However, businesses cannot afford to relax and wait for good times to return. Alongside a recovering economic picture, compliance requirements around ESG are strengthening and have implications for a large number of organizations. For example, there will soon be a crackdown on businesses and commercial property operators that fail to meet minimum EPC rating rules. Currently, it is expected that any rented commercial property must have a minimum EPC rating of Band C by 2027, rising to B as early as 2030. Given that the current minimum is E, this could be a lot of work to accomplished in a short period of time.

Tangible progress requires a mix of big-picture and detailed thinking. Together, seemingly minor details like furniture and waste management, and simple things like encouraging good habits with lighting, water use, workstations, and HVAC, can actually do a big difference and build a broader culture focused on sustainability.

The times are changing

The relationship between ESG and corporate real estate is just one of many big trends I've observed in my time working in this space. Since remote working became the norm, workspaces have been reimagined to fill more collaborative applications as the reasons for coming to the workplace have changed. This has led to challenges for some business leaders in relation to building occupancy and scheduling certainty. Workspace utilization can vary significantly over the course of a week, making it difficult to optimize various building management processes. However, I believe we could start to see a return to a more consistent pattern of people working in offices and other commercial real estate, and many sectors are already bringing back mandatory office days and quotas.

Where businesses decide to locate remains critically important, particularly when it comes to attracting talent. The location of the premises can be a decisive recruitment factor. While I don't see a big trend for organizations to move to urban areas, it is interesting to note the success of innovation hubs such as Cambridge and Reading Green Park, which is now home to iconic brands such as PepsiCo, Bayer , Thales and Virgin Media. Businesses seem to gravitate toward other successful businesses.


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What Budget Means for the Constant Evolution of Corporate Real Estate

Virginie Majaux

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