RICS’ first commercial real estate impact report identifies the contribution of corporate real estate as a driver towards ‘levelling up’ the UK, increasing sustainability and wellbeing, and building communities.
CRE contributes 3.5% of UK employment (1,088,500 people), with every £1m spent on the sector generating employment for 11.2 people. The sum of direct, indirect, and induced Gross Value Add (GVA) (£66.3bn) generated corresponds to 3.3% of the UK total, and for every £1 spent on the sector, £0.9 can be gained elsewhere (GVA generated). It provides significant opportunities for driving inward UK investment, with capital value having nearly doubled since 2000, and in 2020, retail, office and industrial segments accounted for between £260bn and £280bn, with other asset types at around £100bn.
While CRE is facing challenges, it is well placed to adapt, and while infrastructure and moving between cities is often overly focussed on in the quest to level up, commercial property use and evolution can and should be a driving force behind the levelling up agenda, increasing productivity and sparking a boom in placemaking and the creation of communities.
Regional differences for economic development and opportunities are stark, but the report highlights that well-designed and well-managed commercial assets help businesses to flourish, and communities to be built and maintained. High-quality workspaces create employment satisfaction and well-being, and help retain talent. Well thought mixed development in urban infills and brownfields regenerate the local area, generate lower demand for transport and lead to safer environments. Research shows that urban areas with a diverse mix of uses have higher social capital.**
Key recommendations for the UK Government include:
- Establish a framework that supports regions to attract inward investment – focusing on patient investors willing to finance long-term development with social value creation
- Embed contribution and social value of commercial real estate into the levelling up agenda – providing financial support for the renovation of key assets that risk becoming stranded and cannot afford upfront costs, also upskilling and increasing the construction workforce
- Reform business rates so they include proportionality/connection to ESG performance – there is also no universally adopted set of metrics to measure ESG performance of real estate assets, investors and owners face different reporting creating confusion and the risk of ‘greenwashing’.
- There is clear evidence that the EPC is inadequate to support decarbonisation efforts – review methodology for commercial buildings
In combination with these policy recommendations, this report sets out a series of actions that the sector itself can take before waiting for Government, including:
- Coordinate with other industry sectors that stand to benefit from regional economic development – be the driving motivational force for social value
- Take a proactive attitude to ESG measurement and reporting and embed carbon assessment and management in business practices and commit to reduce operational emissions from building operations through efficient energy management [RICS IBOS Standard enables this (International Building Operations Standard (rics.org) and note 1 in notes to editors], and
- Invest in digital technology to improve business services as well as asset performance and flexibility.
Richard Collins, RICS Interim CEO, comments: “This report emphasises the key role that the commercial property sector currently plays in the UK, as well as highlighting it’s future role in driving forward economic recovery; delivering regeneration and opportunity for all UK communities; and achieving sustainability targets.
“I’m delighted to announce its publication, which has drawn on the expertise of our surveying profession, and which underlines how we can come together and drive forward with other key stakeholders the delivery of critical public policy aims, such as levelling up and net zero. RICS is committed to building on this important research in partnership with the profession, government and stakeholders.”
Phil Clark, Chair of RICS’ Commercial Property Forum, adds: “The next ten years will be unprecedented for the built environment. The drivers of change are bigger and more fundamental than many of us have witnessed in our lifetime and imposing themselves faster than the commercial property trends of recent history.
“All those involved with the built environment will need to work together to adapt to that change for the benefit of our ultimate customers, people and society as a whole.”