Economic output of commercial real estate sector  declined in 2023 amid cost pressures

The latest analysis of the commercial real estate sector carried out by property consultancy, Lichfield, for the British Property Federation (“BPF”) shows that its economic contribution declined in 2023 as uncertain market conditions, high construction and financing costs and planning uncertainty weighed on development activity. 

The BPF’s annual assessment of the commercial real estate’s economic footprint looks at the jobs and labour market, output and turnover, tax revenue and capital investment across the sector which comprises office, retail, industrial, logistics, leisure, medical and hotel properties as well as  Build-to-Rent and student accommodation.

In 2023, the sector contributed a total of £110.2 bn (GVA) to the national economy, down more than 20 per cent from 2022 (£137.5 bn) and down from the pre-pandemic level (2019) of £116.1 bn. In 2023 it accounted for 5% of UK economic output, down from 7% the previous year, and saw no increase in the number of direct jobs supported (1.37 m for both 2023 and 2022).

The weaker performance can be attributed in part to a decrease in capital investment. In 2023 the sector invested £60.5 bn, primarily into development and asset refurbishment, down 17 per cent year-on-year (from £72.6 bn) and also below the level seen in 2021 and 2019*.

However, taking a five year view it’s clear that the sector consistently makes an important contribution to the UK’s economy that the next Government should foster. In 2023 commercial real estate continued to be a major contributor of tax revenues, generating £3.9 bn in transaction costs and supporting a record £31.5 bn in business rates.

Read the full report here.

*Data was not calculated for 2020 due to the COVID-19 pandemic