Although the result of the referendum is technically not binding
on the Government, it is politically difficult to ignore. What we
do know is that Cameron's "concessions",
negotiated with the EU earlier this year, now fall away; his deal
was conditional on a vote to remain in the EU meaning there is no
With the Prime Minister announcing his resignation from October
2016, a new leader of the Conservative party is likely to be the
one sitting at the EU negotiating table although with the
possibility of another general election in the UK, considerable
uncertainty remains not only at a macro level but also on a micro
level within the borders of the UK.
Going forward, we now have to work out what our relationship
with the EU will be. We have at least two years to do this,
commencing on the date the UK government invokes its right to
withdraw under Article 50 of the EU's Lisbon Treaty. Article 50
is vague and offers no clear path to an orderly departure. It
provides that the Union shall negotiate and conclude an agreement
with the withdrawing State, setting out the arrangements for its
withdrawal and taking account of the framework for its future
relationship with the Union. The UK government should assume that
it has no longer than 2 years to negotiate the terms of our exit as
any extension is subject to the consent of all the other Member
States. They will only do so if it is in their best interests.
But the picture could be complicated further if referenda take
place in other European countries, as has been demanded by
political parties in France, Italy and the Netherlands. Should EU
membership be put to popular vote, and they follow the UK in
leaving, the EU could be faced with negotiating multiple treaties
on separate fronts, likely affecting the UK's own
Property law for the most part falls within the scope of
national oversight and has not been subject to harmonisation in the
same way as other national laws. There are therefore few direct
legal repercussions for the UK's property laws but the real
estate market will undoubtedly feel the aftershock of the seismic
impact of the UK's vote to leave the EU. While occupier demand
is likely to reduce in line with any downwards economic adjustment
resulting from the fall-out of the Brexit vote and as investor
sentiment wavers causing volatility, a weaker Pound could help
stimulate the global capital that has been sitting on the
side-lines in recent weeks, which could in turn result in increased
capital flows into prime UK real estate. In the short to medium
term, a Brexit will mean uncertainty in the UK real estate market
as everyone's attention is likely to be diverted to the
withdrawal/renegotiation process. To make sense of this complex
mesh of legislation and rules in a Brexit world will take a huge
amount of thought and head scratching, and it would be premature to
even begin to analyse this at this early juncture.
Overall, the outcome of the referendum has wide implications for
UK economic performance, and the property sector is likely to feel
the impact of these, both in the short and long term. However, the
fundamentals that make UK an attractive place to invest remain
despite a parting from the EU – the UK's connectivity
with other global cities; its time zone sandwiched between the east
and the west; and FRI leases with an average term of 7 years* by
way of just a few examples.
While the UK's 43-year membership may shortly come to an
end, uncertainty can provide opportunity and a number of REITs and
real estate funds will be well placed to ride the wave that will
With the result having just been announced, and no path yet
determined, investors should wait for further guidance from
politicians and other policy-makers before making major
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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