The Royal Institute of Chartered Surveyors (RICS) has this week issued a very interesting report confirming that overseas investors still have a significant appetite for the UK commercial property market. This continuing appetite for UK commercial property is interesting when you bear in mind the array of negative reports issued by so-called “experts” since the Brexit vote. There have been so many negative reports on the UK property market that when the market does suffer some kind of reaction, as it inevitably will, no doubt they will be patting themselves on the back and telling us they told us so.
Continued demand for UK commercial property
Towards the end of 2016 there was an increase in demand for UK commercial property spreading right across the country. The main reason space seems to have been the collapse of the UK currency which was down by in excess of 20% against the dollar. Even if you put the debate, both positive and negative, regarding the UK economy to one side, a 20% devaluation of UK commercial property in a short space of time has certainly caught the eye of overseas investors. Economic data for the UK has been relatively positive since the Brexit vote and just last week economic growth was reported to be higher than expectations.
A similar report by the Property Industry Alliance (PIA) also casts a very interesting light on the UK commercial property market. The PIA believes that UK commercial property is benefiting from not only the weakness of the pound but also prospects for the UK economy post the triggering of Article 50. There is a growing belief that the UK may have timed to perfection its move away from the European Union, a union which seems to be imploding with yet another crisis looming for the Greek economy and Italian banks on the verge of collapse. A UK exit from the European Union would give the UK government more flexibility on regulations and associated property costs.
Is it all good news for the UK commercial property market?
One of the only issues at this moment in time is the London commercial property market and the expectation that some of the larger financial institutions could move elsewhere if the UK is unable to remain within the European single market. At this moment in time it does seem inevitable that the UK will exit the single market and then try to negotiate a separate trading arrangement with former EU counterparts. There has been talk of a specific EU trading deal for the London financial markets although this could be difficult to negotiate and could offer the European Union the perfect opportunity to “steal business” from London.
Some investors have been reporting evidence of financial giants currently based in London looking to relocate their head offices. There is talk of Germany and France benefiting from the UK move away from the European Union but time will tell. In the meantime, if we exclude London, there are signs that the UK commercial property market will remain in demand throughout 2017.