The UK government’s Spring Statement was relatively light on new policy detail, but did contain some reasons for optimism for commercial real estate markets. That said, the biggest takeaways were contained in the OBR’s accompanying economic forecasts. These highlight how exposed the UK economy, public finances and financial markets are to an uncertain global macroeconomic backdrop. In short, the Spring Statement changed little in the short term and strengthens our view that risk-free rates are likely to remain structurally higher this year.
That said, Central London may be a beneficiary of global volatility this year. Amidst an Grade A supply squeeze and strong prime rental growth, the office investment market has seen a noticeable uptick in assets for sale.
“The Chancellor did just enough in the Spring Statement to meet the fiscal rules. However, that was largely due to an optimistic set of growth forecasts by the OBR. Given the volatile macroeconomic backdrop, further fiscal consolidation may be required in the Autumn Budget.”
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