The UK real estate market is experiencing a noticeable pause ahead of the vote in June on whether the country stays in or leaves the European Union.

The UK real estate market is experiencing a noticeable pause ahead of the vote in June on whether the country stays in or leaves the European Union.

Some investors are hedging their bets by insisting on Brexit opt-out clauses in deal contracts, according to Richard Divall, head of cross-border capital markets EMEA at Colliers International. 'There is a large pause in the UK markets due to all this uncertainty. A lot of UK institutions are just sitting back and watching, and that of course affects what the internationals do,' Divall said in an interview with PropertyEU TV at MIPIM.

The pause by local dealmakers could have a knock-on effect, he added. 'If the locals are pausing themselves, maybe the internationals will as well. We are seeing some deals "fall out of bed" because of this, but at the same time we are seeing other deals go through.'

Brexit opt-out clause
Some investors are willing to proceed with transactions, but are still hedging their bets. Divall: 'One of the things I have really noticed, and which I have heard from leading lawyers in London, is they are being asked to put in out-out clauses for the referendum into contracts - so they will exchange on opportunities before [the referendum] but they won't complete on deals until they see the result in June.'

But it's not all gloom and doom, according to Divall. One 'breath of fresh air' is increased interest among Japanese investors for real estate in the UK and continental Europe. 'They haven't done much at the moment but they are certainly making big noises,' he noted.

In addition, the pause in the UK it is beneficial for continental Europe and Germany in particular. 'There is a shift of capital moving on to the Continent as people are trying to find their returns,' Divall added.

Watch the interview