What the Autumn 2025 Budget means for commercial property

18 Dec 2025

When Chancellor Rachel Reeves delivered the UK’s 2025 Autumn Budget on 26 November, business leaders were expecting a package billed as both “fiscally responsible” and “focused on renewal”.

What emerged was a set of reforms centred overwhelmingly on business rates, the UK’s longstanding and contentious tax on commercial property. The result? Relief for some, new cost burdens for many and a deeply mixed reaction across the real estate sector.

From retail and hospitality to logistics and office space, the Budget has set in motion a rebalancing of how commercial property is taxed — and the industry is now working through who wins, who loses and what comes next.

The big shift: How the new business rates system works

The government confirmed the introduction of a new five-tier business rates system, replacing the previous two-multiplier structure. Smaller retail, hospitality and leisure premises — generally those with rateable values (RV) below £500,000 — will benefit from lower permanent multipliers, effectively cutting annual bills. According to the Treasury, this represents “nearly £900 million in permanent annual relief” for smaller retailers.

But the bill for that relief is partly offset by a new high-value multiplier applied to premises above the £500,000 threshold. In practice, this means large shops, major hotel sites, logistics warehouses and many corporate office headquarters will pay more — in some cases much more — once transitional relief phases out.

The government framed the policy as a “fairer distribution” of the tax burden. For commercial landlords and occupiers, however, the picture is more complicated.

Retail: Relief for some, but not all

Few sectors have lobbied harder on business rates than retail and, at first glance, the Budget delivers what high-street advocates have asked for: targeted cuts for smaller stores and permanent support for local bricks-and-mortar businesses.

The stock market’s reaction was cautiously optimistic. Reuters reported that retail shares rose on the day of the Budget, as the reforms were seen as “not as negative as investors feared”.

Still, industry bodies emphasised that for larger retailers the picture is far from rosy.

The British Retail Consortium (BRC) welcomed the intention to support high-street recovery but criticised the government for raising the burden on major retail premises.

In its post-Budget commentary, the BRC noted: “The announced permanent reduction in retail business rates is an important step to reduce the industry’s burden from this broken tax. Yet the decision to include larger retail premises in the new surtax does little to support retail investment and job creation.”

Property advisers echo this view. Colliers, one of the UK’s biggest real estate consultancies, described the system as: “A step towards long-requested reform — but far from the simplification and affordability retailers were hoping for.”

For high-street independents, the shift is welcome. For national chains, the changes look set to increase cost pressure at a time when labour, energy and logistics expenses remain elevated.

Hospitality and hotels: A sector under pressure

Image of hotel sign outside a hotel building

Hospitality receives many of the same benefits as retail under the revised rates system, and venues under the £500,000 threshold will enjoy lower multipliers and extended transitional relief. But behind the small-business narrative lies a more challenging story for larger operators, especially hotels.

One of the most vocal critics of the Budget has been Whitbread, owner of Premier Inn. The group warned that the Budget will materially increase its tax burden, with rateable value revaluations pushing many of its hotels into the high-value multiplier band. Reuters reported that Whitbread is facing an additional £40–50 million per year in business-rates-linked costs.

A Whitbread spokesperson told the news agency: “Rising rateable values and the introduction of a higher multiplier create significant cost increases for hotel operators. These changes will force us to look hard at pricing, investment and growth plans.”

Meanwhile, smaller hospitality operators — pubs, craft brewers and independent venues — say the relief provided is not enough to offset steep valuation increases. Analysts at Grant Thornton also highlighted that although the sector receives more help than many others, the picture is uneven.

“Post-pandemic property valuations have risen sharply across hospitality assets,” the company said. “For many venues, the underlying increase in RV outweighs the benefit of the new multiplier.”

The result is a sector still squeezed, with cost-of-living pressures on the consumer side and rate rises on the property side.

Industrial & Logistics: The “silent loser” of the Budget

Perhaps the most unexpectedly impacted sector is industrial and logistics, where properties are often large, modern and command high rental — and therefore rateable — values.

Because these assets frequently exceed the £500,000 threshold, many will fall squarely into the high-value multiplier category. Logistics UK — the leading trade association — did not mince its words.

“The new high-value multiplier penalises logistics businesses for operating efficiently, regardless of profitability,” it said. “This adds cost to every part of the UK supply chain and risks pushing inflation higher.”

The association called for exemptions or reduced multipliers for logistics, arguing that warehouses are a key part of national infrastructure and should not be treated like discretionary commercial assets.

Commercial real estate advisers broadly agree. Cushman & Wakefield, in a detailed breakdown of the changes, pointed out that: “Industrial properties have seen some of the largest rateable value increases in the 2026 revaluation cycle. Adding a higher multiplier on top compounds the impact.”

Offices: No relief, more complexity

Unlike retail and hospitality, offices receive no targeted relief under the new system. That means most will follow the standard multiplier or, for large corporate HQs in prime locations, the new high-value rate.

“The new system is more complex, not less,” said BNP Paribas Real Estate in its commentary. “For large office footprints in major cities, the higher multiplier increases the overall tax burden at a time when occupiers are already re-evaluating space needs.”