Brexit boosts overseas investment in UK property, says LSH
Investment into UK commercial property fell to £9.7 billion in the third quarter of 2016, down by 24% on the same period last year, East Midlands property experts have been told.
Commercial property consultancy Lambert Smith Hampton (LSH) invited a group of influential property professionals to the Nottingham launch of its UK Investment Transactions (UKIT) Q3 2016 report.
Guests at the company’s City Gate East offices met head of office Phil Quiggin and his team and were told that the latest edition of the company’s quarterly UKIT report also reveals that September 2016 was the third busiest September on record, as overseas buyers took advantage of the devaluation of sterling post referendum.
The majority of property asset classes recorded volumes below their five-year quarterly averages during the third quarter of the year, with retail and specialist the only exceptions.
Offices bore the brunt, however, with Q3 investment falling 44% short of the five-year quarterly average, with Central London offices experiencing its lowest transaction volume in five years as Brexit fears dampened investor appetite.
The research shows that local authorities have rapidly emerged as major buyers of commercial property. Local authorities purchased £750 million worth of assets in Q3, by far the largest volume on record from public sector bodies, smashing the previous high of £260 million.
Adam Ramshaw, head of the East Midlands region at LSH, said: “Four months on from the Referendum result, the UK economy and property markets have been far more resilient than initially expected. Although increasing talk of a ‘hard Brexit‘ suggests greater challenges lie ahead, uncertainty over its impact is sure to create both risk and opportunity.
“While Q3 volume slipped to its lowest level in three years, the Referendum result arguably attracted overseas investment rather than deterred it, helped by the weaker pound and a sell-off of quality assets from the retail funds. The continued inflow of overseas capital also underlines that the investment fundamentals in UK property remain on a sound footing.”
He added: “Even if growth prospects have dampened post-Referendum, property continues to look relatively attractive against alternative assets such as bonds, and there is little to suggest the position will materially change in the foreseeable future.
“Increased uncertainty in the outlook will inevitably focus investment demand on secure income, meaning prime and long-leased investments are likely to be protected from pricing pressures. Correspondingly, the heightened perception of risk will put more pressure on pricing for secondary or non-core assets.
“However, if the markets price in too much risk around the feared consequences of a ‘hard Brexit’, some of the most exposed-looking sectors may be the source of greatest opportunity.”
