Renewal on rations?
Knight Frank assesses what the Government's 2025 Spending Review means for commercial real estate, describing it as ambitious in direction but constrained by tight finances. Headline pledges include £113 billion of capital spending and targeted support for defence, energy and R&D, but much delivery falls into the next parliament and day-to-day departmental budgets rise by only 1.2% in real terms.
Key points by sector:
• Science and innovation: the £86 billion R&D commitment signals that innovation sits at the heart of growth plans, with place-based funding and links between Manchester and Cambridge broadening the map. Infrastructure gaps and funding pressures in academia could still slow commercialisation. • Regional cities: £15.6 billion for city-region transport is largely existing money, with only £0.5 billion brought forward and the remainder spread over 2027 to 2032, so benefits for land values depend on follow-through. • London: projects such as the Bakerloo Line and DLR extensions were omitted, but the £2 billion AI Action Plan reinforces the capital's tech-led growth. • Industrial and logistics: defence spending and the approval of Sizewell C are lifting demand in places such as Portsmouth and Filton, but there was nothing new for road freight or strategic logistics. • Healthcare: a £29 billion NHS uplift over three years raises questions about whether it will translate into new facilities, while social care remains underfunded. • Retail and leisure: the high street was mentioned but received no business rates reform or support package, with ONS figures showing more than 360,000 retail jobs lost in a decade. Knight Frank expects further polarisation between prime and secondary stock. • Capital markets: the UK's fiscal caution is enhancing its safe-haven appeal, with cross-border investment into regional markets up 39.1% in Q1 2025.
For occupiers, defence, infrastructure, clean energy and AI businesses stand to benefit, though planning delays and unresolved tax policy remain risks. Knight Frank concludes that the review sets a long-term roadmap rather than short-term relief, and that value will be created where political ambition is matched by deliverable projects.
Source: Knight Frank Newcastle, original article (20 June 2025)
