Article by Howard Freedman, RSM (United Kingdom).

 

Three reports out last week have highlighted the challenges facing the commercial property sector in the aftermath of the Brexit vote.

 

The Q2 2016 RICS Commercial Property Monitor found a significant decline in investment sentiment in the UK commercial property sector, particularly in the City of London, with 54 per cent of survey respondents indicating that the sector is now in the early phase of a more prolonged downturn. 

 

New research by property consultancy Lambert Smith Hampton also revealed that investment activity in the commercial property sector in the second quarter fell 18 per cent on the previous quarter and down 45 per cent on the same period last year, confirming general sentiment in the sector. The firm also predicted that UK commercial property prices will fall by a double digit percentage over the next six months, and that the Brexit vote will lead to an 11 per cent fall in capital values by the end of 2016.

 

Meanwhile, a statement from Land Securities issued ahead of their AGM, has suggested that uncertainty in the market will persist until there is more clarity on both the timing and terms of the UK’s exit from the EU. The company also predicted that demand from occupiers is likely to be subdued until confidence returns and that this could have an impact on rental values. 

 

Commenting on the developments, Howard Freedman, head of real estate and construction at RSM UK said: 

 

‘While the views expressed are understandable, there will be certain sectors that will be impacted more than most. It is generally felt that the commercial office market will be worst affected, however Wells Fargo Bank’s new office acquisition in the City of London announced last week seems to contradict this. There has been a particularly striking decline in investor sentiment highlighted by the decline in those companies quoted on the London stock exchange and whether this will herald a longer term downturn remains to be seen.’   

 

For more insights into the impact of Brexit on businesses, visit RSM UK's Brexit campaign page.


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