Analysis by Search Acumen revealed the value of the UK commercial property market shrank from £101bn in 2018 to £88.7bn in 2019 in the face of economic and political uncertainty.
Some 12 councils attracted at least £1bn of investment in 2019, down from 14 in 2018. Of these, ten were London boroughs.
Only Birmingham and Wokingham represented regions outside the capital prompting calls for the government’s ‘levelling up’ strategy to take effect.
Perhaps unsurprisingly the City of Westminster ranked top for commercial property investment in 2019 for a third successive year. But with £4.9bn of commercial spending compared to £8.2bn in the previous year, it highlighted the overall decline in the sector.
Tower Hamlets, among the biggest risers of 2018, also saw buyer activity drop back from £2.5bn to £1.6bn, while Southwark also fell from £2.2bn to £1.3bn.
Spending in the City of London soared from £2.1bn to £3.3bn, however. Hammersmith and Fulham also enjoyed a commercial investment increase of nearly £1bn year-on-year, rising from £1.0bn in 2018 to £1.9bn last year.
Other Greater London property hotspots that saw commercial spending increase year-on-year included Camden, Kensington and Chelsea, Newham and Lambeth.
Time to ‘level up’
The government’s “levelling up” initiative is part of its wider industrial strategy and is supposed to target the disparities between investment in London and elsewhere in the UK.
While Manchester, Leeds, Birmingham and Nottingham all recorded over £1bn of commercial buyer spending during 2018, only Birmingham passed the £1bn mark in 2019 based on the latest available data, and itself saw a reduction from £1.7bn to £1.1bn.
Alongside Birmingham, Wokingham in Berkshire was the only other local authority outside Greater London to see commercial buyers spend over £1bn in total on property transactions last year – registering almost a four-fold increase from £265m in 2018.
Caroline Robinson, commercial real estate business development manager, Search Acumen, said: “The commercial real estate sector has undergone some serious tests, with Covid-19 following hot on the heels of many months of Brexit uncertainty in 2019.
“Despite this, we cannot dwell in the doom and gloom and instead urge the sector to pragmatically assess the long-term impact of the pandemic and how best to prepare to bounce back in late 2020 and 2021.
“Our analysis reveals clear regional disparities and also indicates how the government needs to do more to support regional developers and to encourage investment in regional infrastructure and real estate projects beyond London.”
No return to normal
Robinson said that although housebuilders and construction companies were gradually opening sites in May, that should not lull the sector into thinking normal operations would be resumed.
She added: “The pandemic has prompted widespread shifts in how individuals and businesses conduct their daily activities, with an overall move towards digital and remote working practices, which are likely to persist long after lockdown measures are relaxed.
“The commercial sector should think realistically about the longer-term impact on office spaces as more people advocate working from home in order to strike a better work life balance, not to mention the positive environmental effects these practices have generated.
“This may prompt a drop in investment in offices as instead the focus shifts to renovations and creating more flexible working spaces in communities and at home.”