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How Brexit Has Affected The Commercial Property Market?

Chartered Surveyors throughout the UK are saying that while the outlook for the market place is both optimistic and pessimistic, in reality the second quarter of 2016 saw a significant drop in demand, expectations and investment enquiries.  Nevertheless, availability of property is slightly up while capital value expectations have taken a dip. Whether these views hold long term or are just an instinctive or impulsive reaction to the Brexit vote, is yet to be fully understood.  Noble Harris Partnerships reviews the key take-outs from the RICS Q2 2016 report summarising the overall mixed reactions post Brexit on the commercial property market and takes a holistic view of the current environment.

Pessimistic response

The recent RICS Commercial Property Market Survey suggests that there is a ‘significant deterioration’ in how both the industry and investors see the position after the leave vote won.

Demand for tenants dropped for the first time after four years of consistent growth. This was particularly true for retail and office units, but demand stayed strong within the industrial area.

The biggest changes in demand and investor enquiries came from London, but all areas of the UK appear to be have been affected somewhat.

Investors have moved from a +25% increase of net balances during the first quarter to -16% during the second quarter, similar to a fall with investors showing interest in property ventures.

Brexit union jack

The optimistic viewpoint

Rents are expected to fall around 3% across all sectors during the next year, which may be a reflection and reset from the substantial increases over the past few years.

The stock of property available fell during each quarter over the past two years across the UK. This lack of supply will help to keep rents at or around current levels in many areas, particularly the industrial sector.

The review from chartered surveyors suggests rents will fall over the next year, with the exception of prime properties, but will increase and show good growth again within three years – with the exception of London and Scotland – and all of this before the UK government discusses the Brexit plans with the EU.

A high number of surveyors still expect new build property to increase in both stock and value over the coming years.

The realist property review

Availability of property hasn’t really changed much this year, before and after the Brexit vote. Space to lease retail and office premises remains tight, with industrial property availability still falling.

Investors from abroad reduced demand across the UK considerably, by 27%, with London being hit by 41%, the lowest for 7 years.

While just over one third of surveyors polled felt that the market is currently in a downturn, over half felt that the recent changes to stamp duty were unlikely to have any particular effect on the market. In Northern Ireland, the South East and the West Midlands, more surveyors felt that stamp duty increases will lower property prices among those in the higher tax brackets.

The majority view is that while there will be a downturn in both investors and demand, it is too early to really understand what the long term market reactions will be like until further information is known about the Brexit deals and how the markets will respond, in both financial and commercial property sectors.

Noble Harris Partnerships celebrates 20 years in the commercial property sector in 2016, two decades working successfully with some of London’s most prestigious Landlords, International Brands, Investors and Chartered Surveyors. For more information visit nobleharris.co.uk