June 2016

Brexit – how will it affect the commercial property sector?

Author: White Rose Office Park

EU Brexit Leeds

With the ballots poised to open tomorrow morning, the nation will decide whether or not to remain a member of the EU. The implications of a vote either way are sure to affect even the furthest reaches of England’s business sectors, but what impact specifically could Brexit have on the commercial property sector?

Having followed the EU referendum since its proposal, what we have discovered is a plethora of varying and, sometimes contradictory, speculations on the outcome a vote to remain or leave could have on the property market.

With this in mind, we’ve consolidated the biggest news stories surrounding Brexit from business and property publications to allow you to have all the information in one place. So, whether you’re voting Remain, backing Brexit or as yet undecided, here is a consolidation of the opinions of Britain’s most informed property correspondents.

The Telegraph

Speaking only last week, Anna White – head of property at The Telegraph, reported that “If Britain leaves the EU, there will be a sharp fall in Sterling making assets cheaper for overseas funds and private buyers and triggering a Brexit bounce in the commercial and residential property sector, according to the international real estate group.” Equally, she made reference to a slowing in investments by stating “investment volumes in the UK commercial property market have slowed in the build up to the referendum. Transactions were 31pc lower in the first quarter of the year compared with Q1 2015, and 11pc lower in London as activity stalled amidst uncertainty, the advisory group found.” She concluded by stating that the worst affected market will be commercial property in London as “both domestic and international companies reconsider the size and cost of their headquarters in the UK capital.”

Read full article here.

Financial Times

The sentiments of Anna White were echoed some two months previously by The Financial Times property correspondent Judith Evans who commented “Private investors from the Middle East and elsewhere have spotted an opportunity in pre-referendum jitters affecting the London commercial property market — seizing the chance to buy landmark buildings while large institutions hold back.”

Read full article here.

RICS

The Royal Institute of Chartered Surveyors have highlighted both the positive and negative impacts of Brexit by making comment on contingency plans laid out by some international firms “to shift their headquarters in the event of Brexit – harming occupancy rates, particularly in London.” Mentioning that the majority of their member firms’ reports reiterate “negative connotations for office occupancy should international firms relocate to the EU. This could ease pressure on office demand, potentially dampen the ‘Central London’ premium, and slow investment and new development through less inward investment.” Equally though they also state that “likely beneficiaries of a Brexit are Paris, Frankfurt and Dublin, but the UK would still have significant quantity of quality office space, and a large pool of highly-educated office staff, which these other cities, at least in the immediacy, may not be able offer.”

Read full article here.

Property Week

Last month Property Week conducted a survey which found that “61% of respondents believed leaving the EU would be “mainly negative” for the commercial property market, while 23% said it would be “mainly positive”.” adding that “the survey of more than 500 property professionals revealed fears that Brexit would have a negative impact on all main sectors of the industry – offices, retail, industrial and residential – although offices was singled out as the market likely to be worst hit, both in terms of investment and occupier demand.” They concluded by saying that “Brexit is a leap into the unknown with an increasing number of contracts that include clauses to protect the position of buyers investing in UK real estate ahead of the referendum.”

Read full article here.

The Guardian

Reporting on the impacts of Brexit on commercial property The Guardian cited Land Securities’ announcement that it had “sold more than £1bn of its assets because of growing risks to the UK market, including the chance of a Brexit vote.” Adding that “the last last commercial property report from Rics found that demand for UK offices and shops from international companies had fallen since the referendum was announced.” They mention that the impact of the referendum would mostly be felt in London, but do conclude by saying that “a remain vote would probably prompt a new burst of activity.”

Read full article here.

Overall the general consensus amongst these bodies and publications is one of unease regarding the uncertainty Brexit could have on the commercial property market; with many investors opting for “Brexit clauses” to be written into contracts. They only thing we can be certain of is that the result of tomorrow’s referendum will have implications across the sector, exactly what they are remains to be seen.

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