Brexit - LEGGETT IMMOBILIER VIEWS
Brexit has confounded expectations. When the UK unexpectedly voted to leave the European Union in June 2016, the forecasts for the property sector were pretty gloomy. According to the predictions, the prospect of a damaging exit and the uncertainty surrounding both the process and the outcome would keep investors away.
Over two years later there is still no clarity over the outcome and the UK-EU negotiations are so difficult that a “no deal” scenario is a distinct possibility. Yet the evidence so far is that investors have not stayed away. Far from it: cross-border flows are set to reach new records this year.
Take the office sector. The feared exodus of banks and companies from the City to other EU cities has so far only been a trickle. This year London has reclaimed the top slot in the rankings of the world’s most desirable destination for foreign investors, leaving Hong Kong in second place, according to Knight Frank research. In the first six months of the year more money was spent on London offices than on offices in central Paris, Manhattan, Munich and Frankfurt put together.
Prices and rents are at their highest since the referendum, pushed up by strong demand which is mainly coming from Asian investors keen to exploit their currency advantage, as sterling has weakened considerably since the vote. South Koreans have been at the forefront of activity this year and they are set to invest ￡4bn by year-end, having fought off competitors to bag prize assets like Goldman Sachs’ new headquarters in the City for ￡1.2bn.
It is not just offices: the hospitality sector tells a similar story. This year the UK came first again for the second year running in CBRE’s annual survey of the most attractive destinations in Europe for hotel investment, followed by Germany, Spain and France.
The industrial and logistics sector is on a roll. The UK’s e-commerce market is the 3rd largest globally with annual sales over $81bn, and growth is expected to continue and be totally immune from Brexit. Urban logistics is undersupplied and there is a huge demand for last mile delivery points, especially in London. Indeed, some say that after Brexit the logistics sector will benefit from rising exports and even from the need for customs check at border points.
On the negative side, house prices have stalled and even declined in Central London, while transactions have fallen, although this is due more to high prices, new taxes and steep stamp duty increases than to Brexit.
Some experts have expressed concern about the student housing sector, which has seen huge growth and development in the last few years, if international student numbers were to decline. Arrivals from Europe have fallen considerably since Brexit, but, as in the case of investments, they may be more than compensated by new students from Asia and elsewhere.
Brexit seems scarier if you are closer. Some European investors seem to be more worried than their Asian counterparts about its negative impact. The French asset management group Amundi made no acquisitions in 2017 and said it would not make any this year.