Autumn Budget 2025: The impact for commercial real estate

Did they go far enough to placate bond markets? On the first reading – yes. Gilt yields are edging down, and the uncertainty around the event itself has, of course, been removed. Meanwhile, the door remains firmly open for further base rate cuts in the near future. On balance, a net positive for the commercial real estate sector, which, above all, was crying out for certainty. But as always, most implications for commercial real estate come from second-round effects – which are legion. And the lesson from last year was that these details need careful analysis before concluding anyone, or any sector, is in the clear.

UK Capital Markets

Nik Potter, Associate, Capital Markets Insight

In a week that started with the first Ashes Test to finish inside two days since 1921, there was a hint of nervous nostalgia in the air as if we were drifting back to more uncertain times. Yet today reminded us how quickly expectations can shift. The budget did not deliver fireworks, but it did offer direction, and that is exactly what markets look for.

From a Capital Markets lens, early market signals are steady rather than spectacular, but enough to calm nerves. Gilts may stay elevated in the near term, yet confidence is building that we could see easing from late 2026 into 2027. For Commercial Real Estate investors, this hints at a shift from pure caution to more calculated positioning as investors will now start planning rather than pausing.

Fiscal discipline is now as much about preserving confidence as it is about balancing the books. The market demanded that the government play the long game, and not swing for the boundary on every ball.

The budget’s focus on infrastructure, innovation and productivity sends an important message that the UK is competing for global capital, not just waiting for it. Strategic investment unlocks confidence and keeps the door open for private sector opportunities, particularly into real estate sectors with resilient income profiles and growth opportunities.

A slower economic backdrop in 2026 may test sentiment, but it will also create opportunity. The fundamentals of UK Commercial Real Estate remain strong, and as the rate outlook improves, those who position early will be best placed to act. The UK is still firmly on the radar of international investors and remains the top destination for global CRE capital in 2025.

Global Capital Markets

Victoria Ormond CFA, Partner, Head Of Capital Markets Insight

A bond market budget.

The bond market budget signalled an increase in fiscal headroom, designed to manage bond rates. Lower inflation expectations also support the case for a further interest rate cut. While the gilt market oscillated 11bps following the early OBR release, with knock-on effects in other countries, at close of the budget announcement, the risk-free rate was down circa 2-3% at 4.47%, while sterling traded between $1.31 and $1.32, broadly unchanged.

The UK maintains its position as a liquid and safe haven market, ranking as the number one global destination globally over the year to date for real estate cross-border capital inflows. Against a backdrop of global uncertainty and relatively bond-market-friendly budget outcome, initial financial market reactions have been largely positive, albeit, as history shows, early moves do not always reflect the fully digested market view.

Implications for Commercial Real Estate

• The budget is unlikely to materially shift international sentiment for UK plc
• Market participants may take time to digest specific tax and investment changes impacting property investment, albeit under the lens of the wider UK financial market stability
• Year-to-date volumes in other locations indicate continued resilience once changes have been digested. In jurisdictions such as Australia with different tax environments, inbound real estate capital flows show momentum, suggesting that tax alone is not a deterrent for global investors

Equity and Bond Market Snapshot

• FTSE All-Share: +0.71% today at budget close
• FTSE 350: +0.71% today at budget close
• FTSE 100: +0.69% (currency fluctuations play a role)
• Overall, a bond-friendly budget provides supportive tailwinds for financing conditions

Sources: MSCI RCA, Market Watch, Knight Frank

Occupiers

Dr Lee Elliott, Partner, Global Head of Occupier Insight

This budget was framed by three themes - Reform, Investment and Stability - but its underlying purpose was to restore predictability for corporate Britain. The Chancellor avoided headline shocks and instead focused on tightening the tax base in ways that large employers can model and prepare for.

The most material change for big business is the reform of salary-sacrifice pensions, which removes longstanding NI advantages and will require companies to rebuild reward structures. Alongside this, a 2-point rise in dividend taxation and the continued freeze in income-tax thresholds signal an environment where labour and shareholder-cost pressures will gradually rise.

Crucially, the government has held corporation tax at 25%, preserving the UK’s lowest-in-the-G7 headline rate and signalling that business taxation will remain stable over the medium term. No new broad-based investment allowances were announced, but the Chancellor placed productivity at the centre of the UK’s economic strategy - reinforcing that future policy support will favour capital that strengthens digital capability, workplace performance and supply-chain resilience.

Taken together, this was a budget of guardrails over giveaways: a bid to lower the uncertainty premium that has stalled investment, and to offer big business the clarity required to plan with greater confidence.

Retail & hospitality

Stephen Springham, Partner, Head of UK Markets Insight

More income tax, more VAT, no money back, no guarantees?

Another inevitable margin squeeze for retail & hospitality operators in shape of an increase in the national living wage (+4.1% to £12.71). Further divisions in a three-tier market within business rates, the promised exemptions reneged upon in the highest (>£500k RV) bracket. A half-baked plan to phase out de minimis rules from 2029, rather than a decisive move with immediate effect. There were very few positives for the retail sector in today’s budget.

Pitched as a boost to the retail sector, increases in the minimum wage are actually a major cost headache for retail & hospitality operators. Since it was launched in 2012, the living wage has risen by +105%. In contrast, retail sales have grown by just +60% over the same period. The net result of operating costs growing at a faster rate than sales is a margin squeeze, with inflation an inevitable pressure-relieving valve.

Still awaiting the full detail on business rates multipliers, but unsurprisingly the lower bracket (<£51k RV) will have a discount to the base rate, the upper bracket (>£500k RV) a premium. Robin Hood-esque thinking that multiples should pay proportionally more than small players may be sound, but ultimately the big multiples have far more sway in determining the direction of travel on inflation.

Stubbornly high and sticky shop price inflation. The last thing the Chancellor would want, but from a retail (grocery particularly) perspective at least, something that all avenues from today’s budget apparently lead to.

Logistics

Claire Williams, Partner, Head of UK and European Logistics Insight

The Treasury’s decision to confirm the end of the UK’s de minimis rule, which exempted parcels under £135 from paying customs duties, while delaying implementation until March 2029, has created a strategic window of opportunity for the logistics sector. The demise of the de minimis threshold won’t just raise revenues; it will reroute supply chains through Britain’s warehouses and act as a catalyst for expansion of onshore fulfilment and logistics networks.

With sub-£135 imports having surged 53% last year to nearly £6 billion, the fiscal case is clear, and logistics operators now have clarity, and crucially, time to prepare. The government expects to raise around £500 million a year once the rule is phased out, a more realistic projection than earlier estimates, which failed to factor in anticipated shifts in behaviour.

Yet it is precisely these behavioural shifts that will offer a meaningful boost to the industrial and logistics market, as supply chains move away from fragmented small-parcel inflows toward consolidated container or airfreight shipments with more fulfilment, processing and distribution from within the UK. This will stimulate demand for domestic logistics space, generate jobs, and give operators confidence to invest in new facilities, automation and inventory strategies.

London

Shabab Qadar, Partner, London Insight

Today’s budget delivers a measured but ultimately cost-raising package for London’s commercial real estate market. While the three-year stamp duty holiday for new listings is a welcome signal of support for the capital’s financial centre, broader tax measures - including extended fiscal drag, higher dividend and property-related taxes, and the introduction of new levies - will add pressure to households and businesses at a sensitive moment in the cycle.

For central London offices, the impact is twofold. Occupiers in finance and professional services will take encouragement from efforts to revive the UK’s capital markets, but rising employment and living costs could temper expansion plans elsewhere in the economy. The combination of higher operating costs and limited movement on planning or infrastructure means decision-making is likely to remain cautious as firms look ahead to 2026.

Investors, meanwhile, will welcome clarity on the fiscal framework but may adopt a more selective stance as pricing adjusts to a tighter macro environment. Prime, ESG-aligned buildings will continue to command interest, but the absence of meaningful support for sustainable refurbishment leaves secondary assets with an unnecessarily uphill path to repositioning.

Overall, this was a budget that steadied the ship but did not set a new course. London’s market will adapt - it always has - but today’s measures mean the sails may fill more slowly before the wind picks up again.

UK Cites

Darren Mansfield, Partner, UK Cities & Data Centre Insight

The budget statement reaffirmed the government’s commitment to regional growth, backed by continued investment in infrastructure and further progress on devolution. The move towards multi-year funding settlements for some combined authorities is an important signal of greater certainty and flexibility for devolved mayors to support local priorities.

Sustained investment in regional transport infrastructure, in particular, is critical to improving connectivity, supporting regeneration, and driving long-term economic growth. The budget reaffirmed the importance of major rail programmes already underway or previously announced, including Cross-Pennine rail improvements and continued investment in Midlands rail infrastructure, while longer-term proposals such as Northern Powerhouse Rail remain under development. Together, these investments have the potential to strengthen links between towns and cities, support labour markets, and unlock growth across regions.

The priority now must be to turn these commitments into delivery.

Data centres

Darren Mansfield, Partner, UK Cities & Data Centre Insight

There was limited new policy detail for UK data centres in today’s budget, but the continued commitment to innovation and national infrastructure will be welcomed across the sector. In recent months, ministers have confirmed four AI Growth Zones in Oxfordshire, the North East, North Wales and, most recently, South Wales. The budget also underlined the importance of long-term, reliable energy supply in supporting future growth. Alongside ongoing reforms to the grid-connections process, the government announced further support for small modular nuclear reactors, signalling a broader focus on expanding low-carbon, firm power capacity that could help underpin energy-intensive digital infrastructure over time.

Science, Tech & Innovation

Jennifer Townsend, Partner, Sciences & Innovation Insight

Today’s budget and the flurry of pre-budget announcements confirm that this government sees science, technology and innovation as the backbone of its economic strategy, and it is continuing to wire policy around that ambition. There is good reason for this, with the UK’s science and Deep tech credentials on display last week, from London Life Sciences Week to new data showing the UK leads Europe on the enterprise value created by university spinouts.

Expansion of the British Business Bank and fresh pension fund commitments into high-growth companies are welcome further steps to close the scale-up capital gap, while AI Growth Zones, the new sovereign AI unit and investment in sovereign compute signal intent to keep critical digital infrastructure onshore and accessible to firms. At the same time, widening SEIS and VCT eligibility and a three-year stamp duty exemption for UK IPOs send an important signal that if you build here, the UK will back you. Further tax reforms may come to support founders.

The life sciences package strengthens that story. Funding for sustainable medicines manufacturing, AI-enabled drug discovery and engineering biology, alongside support for radionuclide medicine and additional capital for specialist life science funds, zeroes in on the niches where the UK can lead. Regional measures, from mayoral investment settlements and a new science centre in Darlington to semiconductor support in Welsh growth zones and investment in NHS patient technology, begin to spread those benefits across the country.

The real test now is delivery and sustaining momentum, as significant challenges persist and global competition to attract innovative companies intensifies. Energy constraints, pressured university finances, NHS market access and pricing and the need to turn pension and tax incentives into real capital flows, amongst other growth blockers, all remain unresolved. If ministers can match ambition with execution and keep clearing roadblocks to growth, the UK has a genuine chance to turn brilliant science into broad-based prosperity.

Energy & Sustainability

Flora Harley, Partner, ESG Insight

The UK faces some of the highest energy costs in the developed world, so removing certain levies to lower prices will be welcomed by households. Since 2022, elevated costs have been burdensome, and this change will ease bills (by some £150) and reduce inflationary pressure, while supporting electrification and climate targets.

Although business energy prices were not directly addressed - 20–25% of industrial electricity costs are taxes and levies - recent confirmation of increased discounts for energy-intensive industries via the Network Charging Cost Compensation and consultation on the British Industrial Competitiveness Scheme is positive. These measures, alongside the development of the corporate power purchase agreement market, aim to boost competitiveness and investment.

Conversely, the pay-per-mile tax on EV drivers seems inconsistent with the zero-emissions mandate and EV grants designed to accelerate adoption. While intended to offset lost fuel duty, the timing feels counterintuitive. Battery EVs accounted for 22.4% of new car registrations YTD, according to SMMT, yet this is still short of the 28% ZEV target. Lower domestic energy costs and renewable energy reforms may soften the impact, leaving EV drivers with savings overall. Real estate owners should plan for integrated EV charging as the trajectory toward electrification remains clear, as well as confirmation on business rates relief on EV charging infrastructure.

Healthcare

Ryan Richards, Associate, Healthcare Insight

The pledge to reinvest savings in the NHS, with £300m in funding to support NHS tech, as well as 250 new neighbourhood health services (100 to be delivered by 2030) in aid of efficiencies to reduce NHS waiting times. While there is no direct impact on the private sector, this could trigger greater adoption of technology across healthcare. Neighbourhood health services will support collaboration between health services.

The circa 4% increase in the National Living Wage will be reflected in the cost lines of operators, primarily through increased staffing costs at the care assistant and ancillary levels. We could, however, see this mitigated or absorbed through increased average weekly fees. There is the question of the extent to which future fee increases can offset staffing costs alongside other cost inflations.

Essentially, as with previous budget releases, it is a matter of ‘wait and see’, not only as cost pressures filter through next year, but also as optimistic plans for the NHS hopefully come into play. The focus will be on the overall impact that costs or potential partnerships will have on bottom lines, and therefore, revenue and rent covers, ultimately driving asset or enterprise values when applying yields or multiples. 

Productivity

Matt Hayes, Senior Analyst, Occupier Insight

Three-word review: Is it enough?

The UK’s growth forecasts are being weighed down by a productivity crisis. Reeves proclaimed that “low investment is the cause of our productivity problem,” before listing a host of measures being taken to address the issue. Examples included UK listings relief, a three-year stamp duty reserve tax exemption for newly listed firms, as well as funding for free under-25 apprenticeship schemes for SMEs, and a widening of eligibility rules for Government scale-up incentives. The Chancellor also doled out eight-figure sums to a variety of regional projects, from Welsh AI hubs to a science centre in Darlington.

But does the country need more?

Reeves was proud not to have broken Labour’s manifesto promises, most notably their commitment to not raise taxes for ‘working people’. Still, in maintaining the current income tax thresholds for another three years and capping salary sacrifices for pension contributions, the Autumn Statement, in many senses, breaks this key promise through sleight of hand, while potentially not raising enough in tax receipts to fund significant public investment.

Despite the rhetoric, this will likely not be looked back upon as a transformative fiscal event. Indeed, it could be viewed as a missed opportunity.