Initial concerns around banks moving to Paris and Frankfurt have been overrated
OUR INSIGHT #4
ONE YEAR FROM BREXIT
UK as a real estate investment destination one year on from the UK Government triggering Article 50 and starting the process of Brexit
A year on from triggering Article 50 and “uncertainty” remains a key buzzword across the UK real estate sector, but its impact on investor appetite looks overstated.
Politically, the UK appears to have made limited progress, with leadership on both sides who could do with showing some strength, delivering a clear framework and answering “what next?” And as we know from the cyclical, and sensitive, nature of the global property markets, uncertainty in real estate promotes anxiety and undermines the market, halting deals and investment and generally making even the savviest investor think twice before plunging head first into speculative development.
This uncertainty however, is often misjudged. For example, in 2015 capital transactions in the UK were £65bn; down to £45bn in 2016 with a projected similar low figure of around £40bn for 2017 following on from the Brexit vote. This was hugely underestimated when the final figure rolled in at £60bn for the year. As certainty increases, we’d hope to see more confidence in the market, which has a habit of adjusting to whatever the new rules are. All the pull factors of London - its vibrancy, global position, education, language as well as its real estate stock will also help to minimise anxieties of London slipping from its position as the leading global city. The growing trend towards urbanisation, with more people looking to move into cities, encouraged by developments in technology, should and has created more than enough demand to compensate for any occupiers who may be lost to Europe.
It is therefore refreshing to meet investors in Hong Kong and China who see London as the perennial and global city it is and are looking at the opportunities the UK still presents. Whilst France and Germany focus predominantly on Asia, and Spain looks to South and Southern America for investment, when London looks globally it means the whole world, particularly beyond its political and geographical borders
Initial concerns around banks moving to Paris and Frankfurt have been overrated – at the moment any moves that have been made have been in the hundreds rather than thousands. On the contrary, we are seeing yields getting lower and deal prices increasing; the latest data from CBRE showing London offering property lenders the best returns among the largest markets in Europe. A recent report from Cushman & Wakefield revealed that companies taking new leases in 2017 increased their total combined space from 5.2m sq ft to 8.9m sq ft, a net take-up of 3.7m sq ft and the highest recorded since they began analysing the data in 2013 and on par with 2015. The “Walkie-Talkie” was sold to at 13 per cent above its initial valuation, Deutsche Bank has recently made a major commitment to London in taking 500,000 sq ft for 25 years at 21 Moorfields and Facebook is said to be close to sealing a deal to secure a new 700,000 sq ft headquarters near King’s Cross. Saudi Aramco is looking to list in London, not Paris or Frankfurt, and Middle East investors are looking at London as their first stop.