Real Estate Survey 2016: Brexit – mortal blow for bricks and mortar?
UK commercial real estate’s post-Brexit shock has proved short-lived, and high-profile gating of investors in a number of UK real estate funds did not precipitate a flood of copy-cat behaviour. But the long-term outlook for investors and lenders in UK real estate remains extremely uncertain.
The shock of the UK’s vote to leave the European Union on June 23 had barely sunk in when panic began to grip the country’s commercial property market.
A number of retail funds suspended redemptions as market participants swapped fears of steep declines in asset prices. Spurred on by a sharp drop in the pound, foreign investors, including US private equity funds, were said to be circling, anticipating a deluge of forced selling at cut-down prices.
As the dust settles and the prospect of a wave of fire sales recedes, the prognosis is not looking nearly so bleak.
“There’s not the distressed selling that some feared might take place,” says Hemant Kotak, a managing director at Green Street Advisors in London, who had initially warned that commercial property prices could fall as much as 20%.
“It’s a much healthier place that we’re in today than in the immediate aftermath of the referendum. In terms of the transactions we’ve seen, there have been modest discounts, but they’re special cases.