We examine what the Budget might hold in store for the commercial property market.

The current high level of uncertainty has been affecting both the investment outlook and investor behaviour, and we have seen several asset sales delayed until after the Budget as investors await greater policy clarity.

Our own market analysis reflects this ongoing ‘wait and see’ approach, with quarterly commercial property investment volumes averaging around only £10 billion during the first three quarters of 2025, compared with £14 billion per quarter over the previous decade.

It appears that the Chancellor is now looking at an increasingly broad range of taxes to balance the books, and commercial property is potentially both a politically safe and an easy-to-implement target. However, we hope the government will see the Budget as an opportunity to help the property industry deliver the structural shifts needed to meet the needs of an evolving economy and an ambitious sustainability agenda.

The tax rises announced in the 2024 Budget were largely shouldered by businesses, and 2025 is likely to see more emphasis on increasing personal taxation. Whilst this will be economically painful, a further significant rise in corporate taxation would mean companies holding back vital capital spending in the short/medium term.

We consider some of the potential changes below.

Stamp Duty Land Tax (SDLT)

• The last significant change to SDLT on commercial property occurred in 2016, when the current three progressive bands were introduced . The government could now be tempted to raise rates, particularly given the relative ease of doing so and the revenue generation potential. It could also alter the bandings, which would mean differential impacts depending on property value, with higher value properties likely to be most impacted.
• Any increase in overall SDLT rates would likely impact investment values, as happened after the 2016 Budget. In the short term, any changes could further subdue investment transaction volumes as investors adjust their strategies. However, we think the market would re-adjust quickly, and then begin to benefit from post-Budget certainty.
• Although less likely, a more fundamental change would be to replace SDLT with an annual levy on ownership, based on property value. This would likely cause investors to pause for longer to consider the impact on their investment strategies, potentially triggering some sales by those concerned at future annual costs.
• The Budget could also close the ‘loophole’ whereby offshore companies or special purpose vehicles can avoid SDLT by selling the shares in a company that owns a property rather than the property itself. This could potentially reduce purchases by international investors, particularly in the short term as they look to adjust their investment structures.

Minimum Energy Efficient Standards

• The minimum EPC requirement for commercial property is scheduled to rise from an ‘E’ to a ‘B’ rating by 2030, and this timescale could be confirmed (or altered) in the Budget announcement. Meeting this target will be an impossible task, even in the buoyant central London market. Indeed, our research shows that 87% of the UK’s office buildings are currently rated C or below. Any delay to the timescale would be widely welcomed by landlords. We think the Budget should consider how the tax system can help deliver this change, as well as improve viability in locations where commercial development does not currently meet market demand (for example some regional office markets).
• In particular, any tax rises that impact property owners could be made more digestible if linked to achieving broader objectives – including reliefs or exemptions for buildings that meet strong sustainability criteria (for example above a specified MEES rating) or are linked to broader regeneration initiatives. We would welcome any financial support mechanisms for upgrading properties, particularly in locations where rental levels do not make this viable and the market is therefore unable to provide the commercial stock needed for businesses to thrive.

Proposed ban on Upwards Only Rent Reviews (UORRs)

• In July, the government surprised the market with a proposal to ban UORRs in commercial property leases. Whilst a major shift in this policy is unlikely to be announced, the Budget could contain further details or clarifications, particularly on the timing of its introduction and the government’s thinking on any potential concessions.

Business Rates

• The Budget will announce new multipliers for Business Rates, applying from April 2026. Importantly, the number of multipliers is increasing from the current two to five (applying to different rateable value ranges). An additional top-up multiplier is proposed on properties with rateable values over £500,000, to fund a corresponding reduction in liabilities for the retail, hospitality and leisure sector. As a result, these properties are likely to face an increased tax burden, including larger retail units. We are concerned that this could leave some larger stores at increased risk of closure (presumably the opposite of what the government intends). The Budget represents an opportunity to rethink this aspect.
• The government could make other positive changes that would help property owners. For example, the BPF has suggested extending Empty Property Business Rates Relief to 12 months (currently, payable after three months for retail and office buildings and six months for logistics). This would better reflect the amount of time typically taken to relet buildings, and better incentivise owners to upgrade vacant buildings and undertake more speculative development. However, there is a danger that the Chancellor may do the opposite, increasing empty rates liabilities to encourage quicker re-letting. We believe this would be counterproductive, leading to an increase in vacant property and negatively impacting speculative development.

Carter Jonas provide Business Rates advice through our trusted partner Ryan.