How would the Commercial Property Sector Be Affected by Brexit?

Posted on 6 April, 2016 by Chris Grigorovsky

If the UK left the EU then London offices would suffer the most, according to Steven Grahame, manager of North Row Liquid Property fund.

Brexit

In a piece for What Investment, Grahame said that London offices would be impacted, seeing many continental European companies, in particular investment banks, retreat to the EU. This in turn would increase vacancy rates, while GDP slowdown would negatively impact rental growth. He says that the London office sector is already trading close to record low yields.

The retail sector, he believes, will be less affected by the change but slower growth and higher inflation would impact the pressure on consumer spending.

However, all is not lost, as he said that there “could well be large offsetting positive benefits from both a weaker currency, making UK property more attractive to foreign investors, and lower bond yields, which would make property yields look even more attractive on a relative basis.”

An example given was when the UK left the European Exchange Rate Mechanism in 1992, which saw property returns at nearly 20% and stocks had almost 50% by the end of 1993.

Although, property returns are “Likely to be very varied”, with low yielding finance-related offices likely to underperform, while industrial units which cater to export-orientated manufacturers should do much better.

He concludes: “We believe that the probability of Brexit is currently low, but on balance it would have a negative impact on the economy and commercial property. However, with a weaker currency and lower bond yields, pockets of value could well appear.”

When 23 June arrives will you be voting to leave or stay? Let us know in the comment section.




Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.


Recent Posts

The latest property data has identified Newquay as the fastest property seller’s market in the UK

Investing in your garden can increase your property’s value

French Riviera temping high-end homebuyers

How can the ownership rights of my commercial property impact a business sale?

Should I incorporate virtual property viewings permanently?

Investment expected to increase across Asia-Pacific in 2021

UK property industry slows as the conclusion of tax break looms

BNP Paribas cautioned investors on Friday as debt-trading bonanza that increased its earnings this past year

Over 300,000 property purchases fell through in 2020 – we show the most frequent motives and the best way to get your house sale back on track

House Prices in the Capital Surpass £500,000

Optimism from the Bank of England’s chief economist

The most expensive commercial properties.

Businesses operating from shared premises will miss out on grants

BA cuts 12,000 jobs, unions hit back

Media Streaming Service See Record Subscriptions

Covid-19 Causes Millions To Claim UK Furlough Scheme