What does the Spring Statement mean for Commercial Real Estate?
Our research experts share their thoughts on the impact of the 2025 Spring Statement for their sectors
10 minutes to read
Nik Potter – Associate, Capital Markets Research
The UK's Spring Statement underscores a renewed commitment to fiscal discipline. While this discipline may constrain future public spending in areas such as welfare and a reduction in public service spending, we still anticipate opportunities for real estate through the UK's aim to be a defence industrial superpower, mandatory housing targets and an increase in infrastructure investment.
The government has emphasised mandatory housing targets, with reforms to the planning policy framework expecting to lead to 1.5 million homes by 2029, which would be a 40-year high for the UK, and the OBR is forecasting to contribute +0.2% to GDP by 2029/30.
The increase of £2.2bn in defence spending, aimed at making the UK a defence industrial superpower, creates pan-sector real estate opportunities in markets where this is being targeted.
Although the OBR has downgraded its UK growth forecasts for 2025 down from 2% to 1%, this is consistent with the OECD's March-25 global growth revision from 3.3% to 3.1%. It remains important to recognise the UK's relative resilience.
Despite a softer global economic outlook, we believe the UK will continue to be a draw of global capital. The UK has shown that during times of global economic uncertainty it remains a destination for capital, and was the top global destination for cross-border commercial real estate flows last year. Indeed, even during the UK's most recent more uniquely turbulent period following the Brexit referendum, the UK has ranked in the top two for global real estate capital flows in nine of the last ten years, with the exception being ranked number three in 2019.
While the overall tone following the Spring Statement is understandably cautious, we anticipate sector-specific dynamics especially around residential development, Artificial Intelligence and Data Centres and Industrial.
Claire Williams – Partner, Logistics & Industrial Research
The government's announcement of a £2.2bn boost to defence spending in 2026 marks a meaningful move toward the goal of spending 2.5% of GDP on defence by 2027, and sets the tone for a reinvigorated industrial policy aligned with national security priorities.
10% of this funding will be invested in advanced technologies, including directed energy weapons for royal navy ships. It's a shot in the arm for advanced manufacturing and could significantly increase demand for industrial and logistics space across the UK. Regions with established clusters in high-tech defence manufacturing, metalworks, or aerospace engineering are particularly well-positioned.
Regions with established clusters in high-tech defence manufacturing, metalworks, or aerospace engineering are particularly well-positioned. These areas could see existing firms ramping up operations and expanding their footprint. This kind of defence-led innovation and reindustrialisation offers real potential to reshape local economies. The Spring statement also reconfirmed the government's commitment to significant infrastructure projects aimed at enhancing connectivity and supporting economic growth.
Shabab Qadar – Partner, London Research
A Slow Burn, Not a Fire Sale
London's commercial property market faces fiscal restraint—but finds promise in pensions, defence, and reform.
The Spring Statement brought limited short-term cheer to London's commercial real estate market, with little in the way of direct stimulus. Growth is forecast at a modest 1% for 2025, and public-sector spending will tighten. Office demand - already under strain from rising business costs - faces further pressure. Yet beneath the fiscal caution lies a longer game, one commercial landlords and investors would do well to watch.
A key bright spot is the government's £2.2bn increase in defence spending. London's role as a hub for aerospace, cyber, and defence-linked firms - particularly in the knowledge corridor from Westminster to Canary Wharf - could quietly buoy demand for high-spec office and R&D space.
More structurally, pension reform remains a potential game-changer. Ongoing consolidation of defined contribution schemes and encouragement for domestic investment could channel patient capital into UK commercial property, infrastructure, and regeneration. Pair that with the prospect of lighter-touch regulation - on planning, Solvency II, and institutional investment - and London may yet see a re-rating.
While business rates and stamp duty reform remain elusive, the direction of travel is clear. London's commercial property sector isn't waiting for handouts - it's positioning for the next cycle, one built on capital flows, strategic resilience, and sectoral evolution.
The Spring Budget 2025 includes substantial public spending cuts totalling £2bn, likely impacting regional cities heavily dependent on public-sector employment. However, the recent increase in defence spending - targeting 2.5% of GDP by 2027, with potential further growth to 3% - provides a significant economic counterbalance. Nationwide investments in defence and public administration, currently valued at £117bn and projected to reach £159bn by 2050, will significantly benefit key regions such as the South East (£7.1bn), South West (£6.9bn), North West (£3.8bn), and Scotland (£2.1bn). Industries such as aerospace, cybersecurity, manufacturing, and technology are poised to benefit considerably from this investment, strengthening existing defence hubs, increasing employment opportunities and supporting demand for commercial real estate.
Judith Fischer – Partner, European Research
Today's UK Budget confirmed a £2.2bn increase in defence spending in the next financial year, reflecting increased global uncertainty. This follows the government's earlier announcement to raise defence expenditure to 2.5% of GDP by April 2027. However, this target may change if NATO raises its defence spending requirement to at least 3% of GDP later this year. This move aligns with a broader shift among European countries, including Germany and France, which are expanding their own defence budgets.
Concurrently, the UK and EU are exploring closer collaboration, particularly in defence and security, marking a step towards resetting their relationship. The UK is in discussions to join the EU's €150bn defence fund. Access to this fund, however, would require a formal security agreement with the EU.
The increase in defence expenditure across Europe is expected to provide a significant boost to key manufacturing sectors, particularly aerospace, electronics, and advanced high-tech industries. It will also strengthen key manufacturing clusters and reshape industrial space demand.
Beyond defence, there are broader signs of rapprochement, particularly in trade and mobility with the latter reflecting the EU's priorities in negotiations. Rebuilding UK-EU ties could enhance Europe's resilience amid geopolitical complexities.
Lee Elliott – Partner, Occupier Research
This was a Budget that sought to reassure rather than reinvent. With business confidence still fragile, especially in manufacturing, many had hoped for bold measures to unlock investment and support growth. Instead, today's announcements were light on direct business interventions. The rise in the National Living Wage to £12.21 will be welcomed by workers but adds pressure for employers already balancing rising costs. And while welfare reform and increased defence spending show fiscal intent, they offer limited immediate benefit to the broader business community. The UK's tight labour market, with unemployment still low but economic inactivity stubbornly high, remains a critical challenge. Yet there was little in this Budget to address skills gaps, hiring constraints, or long-term workforce participation. There's a clear message of control and stability - but sentiment alone won't drive hiring, productivity or innovation. If this Budget was about laying the groundwork, the next must be about delivery.
Matt Hayes – Senior Analyst, Occupier Research
"National renewal": the Chancellor's opening gambit, and the prevailing theme of her Spring Statement. While strictly adhering to her fiscal 'non-negotiables', Rachel Reeves pitched plans for careful, strategic investment to deliver growth and build "resilience to shocks" in a world that is "changing before our eyes."
The key pillars of the strategy outlined represent a hedging against uncertainty. Reeves announced plans to make the state "leaner and more agile" with a view to bringing down the cost of running Government, while enabling it to act more quickly and decisively. She also introduced an ambition to increase capital spending by £2bn a year, committing to work with the private sector to restore the nation's infrastructure and, in turn, reinforce the country's economic foundations to support continued growth. Reeves also outlined a strategy for making the UK an "industrial superpower" for defence, reflecting a focus aligning with the Government's commitment to increasing defence annual expenditure to 2.5% of GDP, and the growing importance of national security as a safeguard for long-term economic prosperity.
Reeves recognised that the plans announced today will take time to make an impact. However, it is clear that the Government is focused on establishing the UK as a safe haven in a global economy that is becoming increasingly volatile and uncertain.
If Reeves' vision becomes reality, will multinationals' increasingly weary CEOs look to the UK as a sanctuary for their businesses? If so, the Chancellor's plans could catalyse investment in scaling local operations, drive new hires, and lead to new real estate requirements.
Emma Barnstable – Associate, Retail & Leisure Research
The spring equinox usually signals brighter days ahead—but for the retail sector, the Spring Statement brought little warmth. Critically, business rates reform was, once again, nowhere to be seen—delivering another dose of déjà vu.
To be generous, there were a few glimmers. OBR forecasts now expect real household incomes to grow at twice the pace predicted last autumn, making Britons over £500 a year better off. But with annual inflation forecast at 3.2%—above the 2% target—the Chancellor’s suggestion that a third runway at Heathrow might help ease the pressure left many wondering what airport expansion has to do with the weekly shop. A confident consumer is a spending one; but right now, sentiment remains fragile.
For operators, there were no nasty surprises on tax. But a pledge to crack down on avoidance may have online fast-fashion giants like Shein watching closely. Multi-channel retailers Superdry and Monsoon recently flagging the abuse of the ‘de minimis’ import rule as a threat to fair competition. That this issue got even a veiled mention might signal overdue change.
A £1bn boost for employment support was another headline giveaway, but it comes alongside rising National Insurance contributions and higher minimum wages. From April, the collective cost of employment for retailers will surge by £7bn. Calls from Next and M&S for a phased approach to NIC changes over two years —to avoid a cliff-edge effect—went unanswered.
Still missing: any mention of long-promised reform to business rates. From April 2025, relief for retail, hospitality and leisure properties will fall from 75% to 45%—a bitter pill for many smaller and mid-sized operators. Worse still, the government has floated a proposal to hike rates for flagship stores (those with rateable values over £500,000) to cross-subsidise smaller sites. Theoretically redistributive, practically destructive. “High Streets UK”—a new coalition representing 5,000 town-centre businesses—warns this could put 600 flagship stores at risk. These are often the very magnets that drive footfall for the independents next door. A full impact assessment is urgently needed, but with consultation not due to conclude until March 2025, meaningful reform remains at least 15 months away.
Plenty of focus was placed on defence spending—an understandable priority, perhaps, but another sign of government fixation on select sectors at the expense of everyday economic engines. Retail and wholesale remains the second-largest contributor to UK GVA, generating £230bn—more than either financial services or the scientific industries so often in favour. Yet once again, retail has been told, implicitly, to get on with it. But to its credit, it usually does.
Jennifer Townsend – Partner, Science and Innovation Research
Today’s Spring Budget reaffirmed the government’s intent to support the UK’s innovation economy, though with limited new commitments for sectors like life sciences. The previously announced merger of the RDEC and SME R&D tax relief schemes will go ahead from April, aiming to simplify the system—but without any increase to the overall rate of support. There was a clear effort to signal strategic backing for high-value sectors, with defence-related innovation receiving £2.2 billion and a pledge to dedicate 10% of the MoD’s equipment budget to advanced technologies like AI and drones. But for the broader life sciences and tech ecosystems, this was a Budget more about continuity than fresh investment. Innovation needs not only clarity, but ambition. If the UK is serious about global leadership in science and technology, future fiscal events must go further to incentivise R&D and crowd in private sector investment.