Three sectors, three decisions, three sets of consequences which could alter the direction of large parts of the real estate market.
Retail first. There is no greater signal of today’s tough physical retail environment than this week’s decision to axe the extension of the Princesshay shopping centre in Exeter.
Plans for the £75m scheme were first submitted by the joint venture between the Crown Estate and TH Real Estate in 2015. Hasn’t the world changed since then?
It’s a big decision and one with significant ramifications for that market; “ballsy”, in the words of one rival.
Credit to the Crown and TH Real Estate for explaining themselves – “unfortunately, in the current market many retailers and restaurants are now more cautious about making new commitments” – and not merely sitting on their hands for an extended period. The key question now is whether this will be a one-off, or the first of many.
According to EG data, there is 5.6m sq ft of permitted shopping centre extensions not yet under construction. That’s 27 projects in total. It is hard to imagine all will proceed. If, as seems likely, the Princesshay Partnership has opened the door, how many will step through? And how many will be as forthcoming if and when they do?
Elsewhere, the Treasury is considering a clampdown on councils investing in commercial property beyond their borders, with confirmation expected in November’s Budget.
Councils have spent £2.2bn on office, retail and industrial assets in the past two years, of which 22% was invested outside their own jurisdiction.
It has seen councils with access to cheap money from the Public Works Loans Board able to outbid the private sector.
Local authority motives are understandable. They need to find innovative ways to source income as Whitehall seeks to end central funding. But there are fears that some are taking on excessive debt and associated risk.
There are no easy answers. Restricting investments to their own borders may be too blunt an instrument and drive some to questionable investments closer to home. If ministers do curb the practice it will be welcomed by competing investors. But it won’t make balancing the public sector’s books any easier.
And then there’s resi, where there are few phrases as emotive as “rent controls”. In campaigning for the 2015 General Election the Labour Party ran with the idea. At this week’s party conference, leader Jeremy Corbyn offered unqualified support.
After his speech, Shelter made a detailed and nuanced argument against many of the likely ways in which such controls might be implemented. “It’s no wonder old-fashioned rent controls are very popular,” said the charity. “People are desperate for big solutions after years of fiddling around the edges by governments of all stripes.”
But it called for greater focus on other priorities for ministers as they sought to increase housing provision: unfreezing housing benefit, building a new generation of good quality homes at low rents and reforming housebuilding. And here Shelter finds itself in step with many in this industry.
To corrupt a phrase coined by an earlier Labour leader, we need to be tough on the housing crisis but also tough on the causes of the housing crisis. So despite such widespread misgivings, don’t expect the rent control argument to disappear entirely.
Labour may not occupy this sector’s definition of the centre ground, but it has moved political consensus to the left.
To send feedback, e-mail damian.wild@egi.co.uk or tweet @DamianWild or @estatesgazette
