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Has Brexit bitten London commercial transaction volumes?

19 Apr 2017

From recent reports, it looks as though some property traders are delaying purchases of UK real estate, as uncertainty in light of Brexit continues. In spite of this, the rental of industrial property in London continues to grow – so what could be on the horizon for investors navigating the Brexit landscape?

One of the biggest contributors to the owner-occupied commercial market, particularly in London, is foreign capital. In 2015, there was an 11% increase in the market, worth around £871bn. With the constant fear that Brexit could push down property prices – particularly as rumours have already been widely circulated in the press about larger firms shifting jobs and premises out of London and into Europe – there have been questions over how a departure from the EU will affect investment.

Despite the boom in 2015, during the second half of 2016 following the referendum result, commercial real estate deals volumes in the City plummeted. Compared to 2015, there were 23% less deals in London, head and shoulders above the national drop across the UK which was 18%. These deals were worth some £8.7bn and the average deal size was £13.6m – its lowest since the financial crash in 2009.

In the quarter following the Brexit vote, investors bought £1.7bn of central London offices – a drop of nearly two thirds from a year earlier. But, whilst investors are seen to be sitting on their hands, the rental market for office and industrial property in London is still alive and well, and it continues to grow despite the fall in overall investment activity.

London commercial properties that were empty or available immediately after the referendum in 2016 mirrored the proportion from the previous quarter. This was 7.2% of available properties let or sold within three months and this was ahead of the rest of the UK which saw just 5.6%.

This demand for property shows that the commercial property market still has potential – even after Brexit has happened. What’s more, investors will not be sitting on their cash and ignoring London’s status in the marketplace and the potential threat to business continuity if the City is excluded from investment.

The momentary stall is more like a pause for breath as a new growth pattern stabilises, but for now the period of uncertainty continues.

If you are an investor in property and you would like some further advice, or you have any questions relating to Brexit and how it could affect you, then please get in touch with the Real Estate team at DMH Stallard, who will be delighted to assist.
 

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