The nervousness and volatility surrounding Brexit have become a trending topic for property professionals. As the UK lurches forward toward Brexit D-day, the uncertainty remains.
The UK property finance business, rather than freezing up from fear, has taken the approach that “life goes on”.
An article in Investment Week recently highlighted how property investment and the relevant funding mechanisms have started to adapt – rather than run the risk of dying.
Calum Bruce is quoted as saying that demand for UK commercial property investment is consistent and that “yields remain firm”. Mr Bruce manages the £237m, Ediston Property Investment Company, so he has some experience under his belt.
He continues by pointing out that Brexit is a catalyst for change. These catalysts appear consistent whether they are initiated by political uncertainties such as Brexit or other economic change.
The key to the approach has been the opportunity that comes with the change. It certainly isn’t rocket science that Brexit will bring change. Nobody is arguing that.
As the day gets closer that the UK effectively shuts its doors on Europe, some investors are erring on the side of caution.
Although this may be understandable, their reasoning can be emotive rather than pragmatic. There will always be a demand for business premises.
UK Property Finance
The UK property sector survived a hefty blow when the Brexit vote clarified that the UK will leave the EU. Despite this, nearly two years later, yields have proven to be resilient through the first quarter.
There is nothing to indicate that property markets are going to take a step back. It is rather interesting to note that the public markets are experiencing more volatility.
Adaptation to the changing market and how it is financed will produce winners both pre and post-Brexit. Open-ended property funds that were forced to suspend trading for a short period after the vote have shown recovery.
The consensus is that UK property finance in London will be hit the hardest. It is also likely to seep deeper into the UK, also affecting other cities such as Birmingham and Aberdeen and Edinburgh in Scotland, although less so.
It will be interesting to see whether Brexit catapults property growth in a preferred UK location outside of London, and if so – where.
Brexit can’t take all the blame for continuing change in the property market. The influence it has had and will continue to have is undisputed.
Additionally, even though lifestyle changes have affected commercial property needs, businesses continue to need premises.
Business Need for Premises Will Continue
The type and location of business premises have started to evolve. The evolution of spending habits by the general public means that there is more demand for retail warehousing.
There is an increase in remote working and a workforce that increasingly works from home. This may have reduced the total office floorspace in demand, however, companies still seek out long-term leases that provide stability.
Those that offer UK property finance and those that invest are now shying away from shopping centres. They are exploring how changes in public spending habits are influencing the demand for the buildings that we use.
Retail warehousing is now an excellent investment. High retail property overheads and the consumer preference for click and collect services have spurred growth in retail warehousing.
Consequently, there is a growth in retail warehousing investment. Online shopping, notably in the fashion retail sector, will continue to grow as people are able to order and return items with equal ease.
Sectors of the property market, including those that embrace technology, are set to prosper. The influence new tech has on the changing demands of the commercial property world is changing the property investment landscape.