Greater ‘certainty’ would unlock commercial property investments, the sector’s lawyers tell Maria Shahid. Can a new prime minister, with a record of regeneration in the north-west, restore confidence?
The low down
Investors stand ready to back the contribution of commercial property to the UK’s elusive economic growth, lawyers say. Better environmental and safety standards are not impediments to deals that will unlock uninvested capital, and the new prime minister Andy Burnham’s record of leading regeneration and growth as mayor of Manchester has raised expectations. What is wanted is certainty – around regulatory requirements, speed of planning decisions and, more intractably, the course of wars in the Middle East and Ukraine. Conflict has pushed up energy costs and the price of debt. Commercial property investments are down 40% on the five-year average. On a positive note, the sector has more confidence long‑term.
The regeneration of Greater Manchester is a central part of newly minted prime minister Andy Burnham’s story. Manchester under his tenure as mayor grew its reputation as a commercially confident city. One test of Burnham’s premiership will be whether he can inspire the same confidence among commercial property investors and their lawyers as they navigate an uncertain economic and geopolitical landscape.
The latest annual report from Real Estate:UK, the body representing the £950bn UK commercial property sector, and market data and analytics provider CoStar showed total UK commercial property investment reached £9.7bn in Q1 2026. That is nearly 40% down on the five-year first-quarter average.
The report blames a combination of global uncertainty caused by continuing trade tensions with the US and escalation of conflict in the Middle East, which has had knock-on effects for the price of energy and the cost of debt.
Will to transact
Nevertheless, ‘client confidence is cautiously optimistic,’ says Stewart Nicholson, a senior associate at Ellisons in Colchester. ‘The long-term outlook is positive, but in the short-term businesses are still dealing with higher borrowing costs, inflation and geopolitical uncertainty. The appetite to invest is still there – clients are just being more selective and taking a little more time over investment decisions.’
Ali Crosthwaite, partner and head of real estate at Simmons & Simmons agrees: ‘We are definitely starting to see an uptick in deal flow and transactional volume. Real estate clients want to transact.
‘Data centres have been unaffected [by geopolitical events]. They are almost in a class of their own,’ she adds. ‘The living sector has held up as well, which is an area of interest for a lot of our client base, and offices are starting to come back, but you definitely get the sense that people are being far more selective. There are opportunities, but people are being very circumspect about which ones and really digging into the business plan and looking at what that’s going to look like.’
The fact of a change of prime minister will have done little to improve confidence. Vanessa Hale, CEO of Real Estate:UK noted at the time of Sir Keir Starmer’s resignation: ‘The prospect of our seventh prime minister in the last 10 years is doing little to position the UK internationally as a stable location for investment.’
Be more Manchester
Burnham’s leadership of Greater Manchester helped transform the city into one of opportunity and has shown the potential of ‘place-based’ policy-making, often dubbed ‘Manchesterism’, his supporters say. The city-region has been one of the fastest-growing outside London, recording economic growth of around 17.4% between 2019 and 2023, while continuing to attract significant investment into office and residential development, as well as logistics.
The ‘Good Growth’ model championed by mayor Burnham, which uses public money for regeneration schemes and to attract private investment, is one he intends replicating elsewhere, say his former advisers and Labour insiders.
The sector has been cautiously optimistic in welcoming Burnham’s decentralised approach, which has already been symbolically evident in the creation of a ‘No. 10 North’, and a stronger Whitehall presence in Manchester.
CoStar and Real Estate:UK’s report, published in May, also noted that the government ‘needs to redouble efforts to promote and redevelop regional investment opportunities’. The UK’s regional markets attracted £17bn last year, 23% down on 2023-24 and 53% of all investment, which is the lowest share in four years. That points to ‘weakening regional appetite’.
‘Greater Manchester has shown what’s possible through long-term investment and greater local decision-making,’ says Nicholson. ‘There isn’t a single blueprint for growth. But bringing a track record of driving economic prosperity outside London is a real strength, and if local areas are given the flexibility to build on their own strengths, I think there’s every reason to be optimistic.’
Regional devolution of economic development, housing, transport and infrastructure investment are high on Burnham’s agenda.
Devolution should also, in theory, lead to quicker planning decisions, through a more joined-up approach. That can only be good for development activity, but lawyers remain cautious in their optimism.
‘I think the property industry is adopting a bit of a “wait and see” approach at the moment,’ says Crosthwaite.
In the meantime, Burnham’s cabinet selections, announced last week, have been broadly welcomed by the sector. Hale noted that the appointments of Angela Rayner as housing secretary; John Healey, a former housing minister, as chancellor; and the reappointment of Matthew Pennycook as housing minister were all positive. But she warned that ‘the same challenges remain both for the economy and for real estate in particular’, notably the ‘development viability challenges stymieing new homes and commercial space’.
The confirmation by Rayner in late July that rent controls would not be introduced were similarly welcome, with experts fearing that their imposition would deter institutional investment.
Planning delays continue to frustrate
Delivery of development projects remains slow due to viability concerns which, in addition to cost and regulatory barriers such as the need for Building Safety Regulator (BSR) approvals, also include planning delays.
‘Planning remains one of the biggest issues affecting market confidence,’ notes Ellisons partner Philip Roberts. ‘Faster and more predictable decisions would probably do more to unlock investment than many tax or regulatory changes.’
The government has introduced a series of long-term reforms intended to accelerate delivery of its housing targets and major infrastructure by streamlining consent processes and greater ministerial intervention in the case of delay. These include the £39bn Social and Affordable Homes Programme (SAHP), for which bidding opened in February, the revised National Planning Policy Framework (NPPF) published in December 2025, and the Planning and Infrastructure Act 2025, which received royal assent last year. However, delivery remains sluggish.
Planning lawyers caution that the success of these reforms will depend on adequate resourcing of local planning authorities and the government’s ability to reduce delays across the wider development process. Moreover, implementation of many of these measures is still pending.
‘While the groundwork for the reforms has already been done, a lot remains to be implemented,’ says Nicola Gooch, a partner in Birketts’ Sevenoaks planning and environmental team. ‘We are still waiting on publication of the final NPPF – which contains National Management Policies for Decision Making, the full implementation of changes to the planning fee regime, the next set of reforms to the NSIP regime and potential further restrictions on judicial review challenges to major infrastructure projects.
‘Much of the Levelling-Up and Regeneration Act also remains unimplemented, including the move to environmental outcomes reports, which was only revived earlier this year,’ she adds. ‘While many of these changes are aimed at increasing housing delivery, their impact will extend much further than that, as the changes will apply to residential and commercial developments alike.’
Alongside planning reform, the government has undertaken an overhaul of local government in England, replacing two-tier county and district councils with unitary authorities in an attempt to streamline decision-making and strengthen devolution.
How local government reforms (LGR) will work alongside Burnham’s proposals for devolution remains to be seen.
Stuart Tym, planning partner at Knights in Birmingham, says: ‘LGR was already happening pre-Burnham, but his vision may enable decentralisation to be brought forward quicker.
‘Burnham argues that you could reorganise every council in England into unitary authorities, without materially changing where power sits,’ he adds. ‘In the planning context, under his model, strategic planning, infrastructure funding, transport integration and housing delivery would increasingly be shaped at the combined authority level. If duplication is removed and governance is simplified, whether these organisations have the funds to do all of the things we are expecting them to do remains to be seen.’
Development delays
Another factor inhibiting the market is the Building Safety Regulator (BSR), which was introduced by the Building Safety Act 2022 and oversees ‘higher-risk’ buildings.
A report published at the end of 2025 by the House of Lords Industry and Regulators Committee found that delays caused by the regulator’s approval processes were having a ‘worrying impact’ on the delivery of new housing in high-rise buildings and slowing progress on government’s target of building 1.5m new homes in this parliament.
Following mounting criticism of the delays in Gateway 2 (the mandatory clearance from the regulator required before construction for higher buildings), the government announced a package of reforms last autumn. It also appointed Lord Roe (Andy Roe), a former commissioner of the London Fire Brigade, to lead the BSR.
In January the government also transferred the BSR from the Health and Safety Executive to the Ministry of Housing, Communities and Local Government, and began working with applicants seeking approval.
These changes have led to shorter waiting times and more approvals. Latest figures, published in early July show that approval rates across all application categories have improved from 75% to 77%.
Nonetheless, development activity, particularly in the residential sector, is still ‘challenged’ notes the CoStar/Real Estate:UK report, with the S&P Global UK Construction Purchase Managers’ Index in March 2026 standing at 45.6 – the 15th month in a row below 50, the point at which the sector is contracting.
Lawyers note that the introduction of the building safety levy, which comes into force in October, will do little to boost the viability of development schemes. Paid by developers, the levy is intended to fund the remediation of unsafe buildings and is based on the gross internal floorspace of new residential developments, with rates varying by local authority.
‘On its own [the building safety levy] is manageable, but it comes on top of increasing build costs, planning delays and a growing number of regulatory requirements,’ says Philip Roberts, a partner at Ellisons, Colchester.
Guarded optimism
Earlier in June, the government made a long-awaited interim policy announcement on minimum energy efficiency standards (MEES) for non-domestic property. This proposes that for larger, privately rented non-domestic buildings a minimum energy performance certificate (EPC) B will be required from 2031, where cost-effective, while for smaller buildings it is expected to stay at the current EPC E. The previously proposed interim EPC C to take effect by 2027 will not be taken forward. The threshold for a ‘larger’ building is 1,000m2. Until secondary legislation is passed, the current EPC E standard remains in place.
Crosthwaite notes that this latest announcement will not change the direction of travel for her clients. ‘Most of them were already making adjustments to their portfolio in line with what was in the consultation previously. The direction of travel had [already] been set; people can see that more sustainable assets trade for a better price, so there is a value in improving them, as well as the operational savings from having lower energy bills. I don’t think that the size metric is going to be that seismic, other than possibly helping smaller landlords who may have struggled.’
Others, however, warn that the threshold could lead to a ‘degree of market segmentation’, including Howard Kennedy partner Beth Myers. ‘Over time, this divergence in regulatory requirements may contribute to differing investment profiles across the market, with implications for asset value, liquidity and access to finance.’
For smaller landlords, the threshold will come as a relief, says Emma Hughes, a partner at Knights, Worcester, allowing them to upgrade properties without the pressure of a deadline.
Rent reviews
The government introduced provisions to ban upwards-only rent reviews on certain commercial leases in the English Devolution and Community Empowerment Act 2026. The proposed ban was ‘sudden and untrailed’ notes the CoStar/Real Estate:UK report. While the changes are not due to come into force until 2027, the ban will prevent any mechanism that operates on an upwards-only basis. This is already having an impact on market confidence.
'From a tenant’s perspective, allowing rents to move with the market rather than only increasing should be a positive change'
Stewart Nicholson, Ellisons
Hughes notes that while the ban is intended to protect tenants, it may have unintended consequences, with landlords looking for certainty to offset any potential decrease. These could include stepped rents, a higher initial rent or shorter leases with the potential to renegotiate rent more frequently.
‘From a tenant’s perspective, allowing rents to move with the market rather than only increasing should be a positive change, particularly for smaller businesses that are already under pressure from rising costs. The bigger question is how landlords respond,’ says Nicholson. ‘Like many reforms, the intention is positive, but the market’s response will determine whether it delivers the right outcome.
‘The biggest impact is likely to be on investment valuations rather than day-to-day occupational transactions,’ adds Roberts. That is due to the certainty for landlords, lenders and investors that upwards-only rent reviews have traditionally provided.
Sound foundations
While some optimism is returning, the overarching concern among clients in the property sector is the lack of certainty that pervades the current market, whether that is due to geopolitical, economic and political turbulence, or proposed changes in regulations and legislation.
‘The UK remains an attractive real estate market. The overriding theme isn’t a lack of capital, it’s a demand for certainty,’ says Roberts. ‘Investors can accommodate higher standards, additional costs and regulatory change, provided there is a clear and stable framework. What damages confidence is not regulation itself, but uncertainty over what comes next.’
Maria Shahid is a freelance journalist
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