It is business as usual for British real estate following the referendum result to leave the EU, but uncertainty still abounds as to what Brexit will involve, experts from Standard Life Investments said at a briefing on ‘What lies ahead for real estate investing?’ which was held in London on Tuesday.

standard life hq

Standard Life Hq

'The initial shock has subsided, and so has the race for the exit,' said David Paine, head of real estate at Standard Life Investments. 'Financial markets have recovered, and the monetary policy response has been swift, significant and supportive.'

After an understandable knee-jerk panic reaction to the surprise result of the vote, the situation for investors is now the same as it has been since the beginning of the year: a sense of uncertainty over what will happen. In the first half of the year there was a question mark over the referendum result, while since June the doubts have been over what Brexit will mean in practice, especially for the real estate sector.

‘The long-term outlook is harder to ascertain,’ said Paine, as negotiations between London and Brussels are yet to start and there is no clarity as to what kind of deal might be on the table.

In the meantime, the economic indicators are more favourable than expected and the consensus is that the UK economy will slow down, but it will avoid a recession. In the property sector, the yield gap is close to historic highs and for investors yield is very hard to find. According to Paine, ‘in the UK lower single digit returns are the new normal, but in a world of low numbers real estate returns remain attractive.’

The medium-term impact of Brexit will hinge on the economic effects, and so far the picture is one of slowing growth but with no stalling of investments. The long-term impact of Brexit will depend on what will replace the current EU membership: if a tailor-made bilateral agreement, a customs union, a free trade pact or membership of the European Economic Area. The British government, under pressure to reveal its hand, has so far kept its cards close to its chest.

From a sector perspective the London office market is expected to be the most impacted by the UK’s exit from the EU, and 'some erosion of jobs created since the EU foundation is expected,' said Paine, and investors will inevitably look at offices in cities like Berlin, Munich, Stockholm, Dublin and Madrid. 'Industrial and best in class retail are likely to be the most resilient sectors in the UK,' he predicted.

Standard Life Investments manages £17.8bln of assets in direct real estate, public listed real estate and real estate debt. It announced on Tuesday that it has achieved 15 Green Stars in the 2016 GRESB Real Estate Assessment, the highest number of all participants for the second consecutive year.