For the past 12 months, politicians and commentators have remained fixated on Brexit. As negotiations for the UK’s exit from the EU begin, the commercial real estate market in the UK appears up-beat.
The post-referendum uncertainty that initially impacted the commercial real estate market appears to have passed; first quarter figures for 2017 were at their strongest since 2014, with almost £5bn of commercial real estate transactions taking place. The Head of City Investment at CBRE noted that this was “a great endorsement of London’s continued appeal and testament to its resilience and ability to adapt and diversify”.
The second quarter will be buoyed by reports that Blackstone has purchased a controlling stake in The Office Group, a company that provides flexible office space, for £500 million. The deal has been noted as a seal of approval for commercial real estate in the UK – putting talk of an exodus by financial firms in perspective.
As expected, overseas investors have accounted for 80 per cent of these deals and transactions – the fall in the value of sterling, the stability offered by long leases and upward rental trends all contributing to this trend.
An undertone of uncertainty, of course, remains – we are yet to know what Brexit will really entail. The outcome of this month’s snap General Election will certainly impact how the UK’s negotiations with the EU pan out; with a softer Brexit appearing to be back on the agenda following the Conservative Government’s loss of its Parliamentary majority. As part of this, given the decreasing numbers of “hard-Brexiteers” in Parliament, we may well see accommodations reached so that the UK retains its access to the single market – which would certainly be good news for commercial real estate in the UK.
