On June 23rd 2016, the UK voted to leave the European Union in what has now become known as ‘Brexit’. The outcome has affected everyone in some manner, but now, 6 months on, how has it impacted the current state of the commercial property investment market?

Investment in Summer 2016

According to The Financial Times, UK commercial property investment slumped around the time of the Brexit vote, which most likely was due to the uncertainty that the referendum caused. The publication reported on research from commercial estate agency Lambert Smith Hampton and found that £9.8billion of property was bought during the second quarter of 2016.

This sounds a lot, however it is 18% less than the previous quarter and 45% down on the same period in 2015.

However, one sector of commercial property investment that did see growth was offices. During the second quarter of 2016, the London office market rose to £3.1billion from a previous four-year low in the first quarter.

Commercial Investments Immediately After the Vote

After the vote, a number of major commercial property deals fell through and investors became especially cautious of where they placed their well-earned money. There were many reports that businesses were scaling back investment plans and some may even leave the country to set up shop elsewhere.

Despite this, RICS reports that there was an increased occupier demand for property in the industrial sector and availability continued to decline as a result, showing that it was not all bad.

The State of the Commercial Property Market Now

According to RICS’ 2016 Q3 UK Commercial Property Market Survey, sentiment is beginning to recover after the uncertainty brought by the EU referendum and both rental and capital value projections are now positive. As it states, senses of a market downturn have been receded ‘with the initial shock of the Brexit vote fading and some normality returning to the market’.

During the run up to the vote, there were many warnings that a verdict to leave the EU would result in businesses relocating and a loss of jobs, however the Q3 survey found that 86% of respondents had not seen any evidence of firms looking to relocate away from the UK in response to the EU referendum outcome.

Of the 14% who had seen evidence of this, Northern Ireland, the West Midlands and Central London had the highest response. When asked if they expected business to move away in the next two years, again the majority answered ‘no’.

Other categories found that surveyors expect to see rents increase modestly in the near term, investment enquiries are beginning to strengthen once more, and Central London has experienced a rise in foreign investment enquires due to the weak pound during uncertain times a few months ago.

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So, the commercial property market is recovering, but what does 2017 have in store? Well, when Brexit will actually happen is still uncertain. Article 50 must be triggered in order to begin the process of leaving the EU with approval from parliament, which is doing all it can to delay proceedings.

A decision will be made in January about this, so until then it’s a waiting game. In the short term, investment appears to be back to ‘normal’.

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