Post-Brexit binge in commercial investments

Pent Up Demand for Post-Brexit Property

25.07.19

There is pent up demand in the commercial property sector and this could result in a ‘post-Brexit binge’ in investments, new research has suggested.

A report into the state of the country’s commercial property market by Shawbrook Bank and the Centre for Economics and Business Research (Cebr) noted that Brexit has had a negative impact on the country’s commercial property sector.

It revealed that capital value growth turned negative in the quarter immediately following the EU referendum where the UK voted to leave, and more recently also entered negative territory in the final quarter of 2018 as companies and businesses prepared for the initial Brexit deadline in March.

The report also revealed that commercial properties in the retail sector have come under particular pressure since the Brexit vote, with the political uncertainty surrounding the Brexit negotiations creating “a rise in consumers who are increasingly pessimistic about the near-term economic outlook of the UK”.

While retail property has struggled in recent years, industrial properties have fared much better. “Stockpiling activity and strong demand for warehouses from online retailers have helped the sector to withstand other economic headwinds,” the report stated.

However, it warned that a no-deal Brexit, along with “the unwinding of the stockpiling effect”, poses a risk to manufacturers who are currently occupying industrial properties in the UK.

Director of commercial property investment at Shawbrook Rob Lankey said that, overall, the long-term picture for the wider sector is broadly positive.

“With the long-term view and fundamentals of the commercial property market still compelling, I would go so far as to say that we will see a ‘post-Brexit binge’ from professional investors looking to utilise the cash they have stockpiled to take advantage of investment opportunities in the post-Brexit landscape,” he asserted.

It appears that local authorities are investing more heavily in commercial property too. Room 151 reported that government data published earlier this month indicates that commercial property investment by councils in the UK climbed in 2018/19.

The news provider noted that, because of how local government organisations report their finances, it’s hard to get a definitive figure, but that there are signs more councils are buying property and land.

It’s believed that many local councils are hoping to use their commercial property investments to produce revenue income. The increase in investment in this area has been spurred on by the cheap cost of borrowing money to fund such purchases, the website added.

This is despite central government and the Chartered Institute of Public Finance and Accountancy (CIPFA) expressing “disquiet at the practice”, David Green, strategic director at Arlingclose told the news provider.

“Announcements of further guidance and rumours of legislation to limit such activity might even be encouraging local authorities to rush to invest before it’s too late,” he added.

 

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