How Might the New Government Impact the Commercial Property Sector?

The new Labour government now in power is on a mission to achieve a “decade of national renewal”. For the commercial property sector, there are some indications that this could bring new opportunities but there are also potential risks to consider.

In this article, we look at how the new government might affect the sector, covering the issues of planning and infrastructure reform, proposed changes to renters’ rights, the government’s commitment to business rates reform and the potential for new energy performance targets for commercial buildings.

Need help with commercial property law? Please contact our highly experienced Commercial Property team who will be happy to advise.

Key points to know

• A new Planning and Infrastructure Bill has been proposed which could speed up planning decisions and create new opportunities but might also leave developers facing new obligations.
• A new Renters’ Rights Bill is intended to improve rights and conditions for renters, placing new restrictions and obligations on landlords. This could affect build-to-rent developers and those converting commercial property to residential and might pave the way for similar legislation targeting commercial tenancies.
• The new government have committed to replacing business rates with a new system to help small businesses. This could increase occupancy rates in small premises such as high street shops, increasing incomes for commercial landlords. However, no details of the new system have yet been released, creating uncertainty in the sector.
• No plans have yet been announced to change energy performance targets for commercial property, but with the new government’s ambitious carbon reduction plans, the introduction of more stringent requirements should not be ruled out.

Planning and infrastructure reform

A new Planning and Infrastructure Bill has been proposed as part of the new Labour government’s first King’s Speech. The aim of the Bill is to “accelerate housebuilding and infrastructure delivery” thus “unlocking more housing and infrastructure across the country and supporting sustained economic growth”.

Key aspects of the proposed Bill include streamlining and speeding up delivery of critical infrastructure, reforming compulsory purchase compensation rules, modernising local planning committees and increasing local planning authorities’ capacities, and using development to fund nature recovery.

With the Bill still in its early stages, it is impossible to know what its final contents might be or how they will impact developers, businesses and investors. However, there is the potential to speed up development processes and increase opportunities for developers.

On the other hand, the commitment to using development to fund nature recovery could mean an increase in the obligations placed on developers to support biodiversity and other environmental improvements. There will inevitably be much debate about balancing the need to unlock development and addressing environmental concerns.

Renters’ rights

Landlords are set to have reduced powers to evict tenants, lose the option for fixed term tenancies and have significant new obligations around property standards. These changes are expected under the terms set out in the new government’s Renters’ Rights Bill.

The Bill is a new version of the previous government’s Renters (Reform) Bill and includes provisions such as banning ‘no-fault’ evictions, getting rid of assured shorthold tenancies, imposing a ‘decent homes standard’, requiring landlords to promptly investigate and fix health hazards and limiting rent increases.

While these reforms are targeting private residential landlords, they will also affect those in the build-to-rent sector and any developers looking at transforming commercial property into residential. It is also possible that some of these principles could ultimately be applied to commercial tenancies in the future with further legislation.

Business rates reform

Labour have committed to “replace the business rates system, with a new system that will level the playing field between the high street and online giants”. This is part of their plan to benefit small businesses but details about exactly how they will implement this and what the new system would look like have yet to be released.

The previous government introduced the Non-Domestic Rating Bill in 2023 with a similar goal, but this Bill was scrapped after it failed to make its way through Parliament before the General Election. This earlier Bill proposed changes such as more frequent valuations to ensure rates remained fair for properties with falling values and to provide business rates relief for those investing in improving their properties.

Given the Labour government has committed to replacing the current system rather than reforming it, it may be reasonable to expect more radical changes. It is to be hoped that a fairer, more responsive new system will make smaller premises such as high street shops more attractive to investors, helping to fill empty properties and increase rental incomes for commercial landlords. This could also help to regenerate high streets which may present other commercial property opportunities.

However, until more details emerge about the potential reforms, it is hard to draw too many conclusions about what exact impact any changes to the business rates system might have.

Net zero and energy efficiency standards

The new Labour government has not yet suggested any change to the target of reaching net zero carbon by 2050, but it has announced a range of new environmental policies, including plans for a “cheaper, zero carbon electricity system by 2030”. It is possible that future policies will target the commercial sector although no announcements have yet been made.

One area that commercial investors and landlords should keep a close eye on is the issue of EPC ratings for commercial properties. Currently, a minimum EPC rating of E is required in order to rent out all non-domestic properties (with certain, limited exemptions, such as for listed buildings). It is very possible that this requirement will be tightened up in future, meaning many landlords would need to invest in improving the energy performance of their properties.

How Longmores can help with commercial property law

Longmores’ commercial property lawyers have decades of combined experience assisting businesses, investors, landlords and managing agents with their real estate legal needs. We offer pragmatic, no-nonsense advice and strong commercial understanding, all delivered with exceptional client service at a reasonable cost.

To discuss how we can help with all aspects of commercial property law, please contact our highly experienced Commercial Property team who will be happy to advise.

Please note the contents of this article are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.