Property leaders in the UK have warned that an extended period of uncertainty is inevitable following the result of Thursday's referendum to exit the EU.
'The property sector has probably followed the EU referendum more closely than any other industry and has witnessed the impact of the uncertainty and speculation in the run up to the vote,' John Forrester, EMEA CEO of Cushman & Wakefield, said in a comment. ‘While the decision of the UK electorate is now confirmed, a period of further uncertainty is unavoidable as businesses, the financial markets and the political establishment in the UK, Europe and globally come to terms with what this means.'
Alan Tripp, UK managing director at LaSalle Investment Management, agreed that the decision is likely to be followed by a period of uncertainty in the financial community. 'Clearly the impact of this decision will be felt beyond the UK’s shores as the UK is the EU’s third largest market by population. We are therefore entering a period of unprecedented change as markets and sectors adapt.'
Property sector in shock
Delegates, speakers and panellists attending and participating in the Society of Industrial and Office Realtors’ (SIOR) International European Conference in London on Friday arrived in shock following the Brexit vote.
During an investor panel discussion and Q&A, moderator Richard Divall, head of cross-border capital markets at Colliers International, said the vote was an 'economic disaster for the UK'.
Philip La Pierre, head of investment management Europe at Union Investment Real Estate, added: 'We didn’t expect this, but now that it has happened we should not make rash reactions to ongoing London deals. Opportunistic capital may swoop in, but overall the UK will certainly face investment stagnation.'
He also warned that investors will begin to move to the US and Asia.
Kent Gardner, CEO at Evans Randall Investors, said he also expected an immediate period of uncertainty over factors such as pricing, debt availability and valuations. This will be accompanied by some volatility in the market but, he added, this should reduce steadily in the ensuing months as the impact of the referendum become known and the nature and timing of Britain’s exit becomes clearer.
'There may well be short-term pain but the real estate sector will adapt to Brexit and we need to play to the UK’s strengths. Many of the factors that make the UK, and London in particular, a compelling international business, innovation and cultural destination still remain and these will be fundamental to the sector's longer-term resilience.'
Opportunities for bold investors
Both Forrester and Tripp also stressed that there would be opportunities. 'What is clear is that in any scenario there will always be opportunities and those will become clear in the weeks and months ahead,' Forrester said. Tripp said he expected markets to overreact in the short term and that real estate performance objectives may now come under considerable strain in the next 12 to 24 months. He added, however, that the long-term impact of Brexit would be broadly neutral.
Speaking at the SIOR meeting in London on Friday, Jonathan Baines, consultant at Farebrother, was also optimistic. 'Things will calm down quicker than we expect,' he said. The UK may even become more attractive to US investors, he added, as they realise that they can buy more property for their dollar.
One of the key questions facing investors is how the Brexit decision will affect London's safe-haven status. Not all property professionals are optimistic that the fallout will be contained. Donald Rowlands, head of real estate for the UK and EMEA region at global law firm Herbert Smith Freehills, pointed out that the jury is still out on whether an exit will fundamentally alter the UK's status as a global investment centre for real estate.
'The UK is seen by some as a gateway into the EU, and by others as an integral part of a global real estate market whether or not the UK remains part of the EU. We have spoken to a number of our overseas investor and domestic real estate clients over the last few months. Brexit worries have undoubtedly impacted upon investor confidence in the UK investment market - volumes are well down and buyers and sellers are eagerly awaiting tomorrow's result before re-entering the market.'
He added, however, that UK real estate remains an attractive investment in a volatile world where investor returns from other fixed income investments remains challenging. 'The exit vote may be seen by some overseas investors as an opportunity to enter the market at a time of uncertainty and, assuming there is a continued negative impact on sterling
