As a leading firm in the built environment industry, we have
seen the industry evolve through previous economic and political
shockwaves, most notably the effect of the global financial crisis
in 2008. We believe that it is important for the industry to allow
the hysteria generated by the vote to subside and then take a
considered view as to its short- and long-term future in relation
to its key sub-sectors. Below we have outlined our view on the
Investment and development
Whilst there may be a flurry of activity for investors looking
to take advantage of the pound's depreciation against the
dollar, yen and other safe-haven currencies, the overwhelming
sentiment will be caution and delay in decision-making. The key
difference between now and 2008 is that the proportion of
distressed sellers is modest and the investment market is dominated
by equity-rich ownership who would not be compelled to re-price
assets and bring them forward for sale. With political uncertainty
at its zenith at present, we foresee a general slowdown of activity
with the predicted rebound in the market following a positive
"Remain" decision not materialising. We consider that
even though some businesses will look to move parts of their
operations to Europe, London will remain a significant global
location for investment but the second tier market may suffer.
The Brexit decision has laid bare the disconnect between London
and the regions, so it is imperative that political stability is
returned as quickly as possible and clarity is given on key
infrastructure projects such as Crossrail 2, HS2 and the expansion
of Heathrow. Without this, there is a risk of London stagnating due
to the uncertain long-term prognosis for occupier-demand from
financial services and the tech media sector, with such sentiment
being dependent upon the perception of London as a first-choice
centre of academic excellence and an open and transparent society.
If London activity slows, the knock-on effect of this is to risk
starving appetite for investment outside London, as sentiment to
invest in those locations and benefit from the greater returns
offered was underpinned by political commitment to these large
Brexit may accelerate the re-pricing of assets, which some
commentators were saying was inevitable, but the return to
longer-term confidence needs to be underpinned by political
stability and commitment to deliver these projects.
We consider that some re-pricing of residential property is
inevitable (particularly at the top end of the London market, which
many investors considered to have reached its peak even before the
leave vote), fuelled in part by the panic created by sharp falls in
the share price of UK major home builders, and whilst currency
depreciation may provide a stimulus for a short-term spike in
activity, to ensure activity has the chance to return to pre-Brexit
levels, developer and investor confidence will depend upon the
Freedom of movement - the UK needs to
maintain its reputation as an attractive place to live and work,
and an entry point to Europe for both students and workers outside
Commitment to infrastructure -
long-term commitment to large-scale residential projects demands
the stimulus of political commitment to these projects
Preservation of the UK's status
as an open and transparent society and a first point of call for
innovation and a place to do business
Language - the power of English as a
dominant second language for business and education is, and always
will be, an important draw but political and economic isolation
feared by the vote must be countered by a quick and decisive
We consider that there will be some permanent damage to the
residential market, irrespective of whether the renegotiation
between the EU and UK preserves the single market and freedom of
movement for workers across the EU Block and Britain. The UK had a
privileged "safe haven" first port of call for foreign
investment, reaffirmed by a recent JLL study which considered it
the most transparent place to invest. That demand, and confidence
in London and the regions as a global city and default entry point
for Europe, fuelled the confidence to invest and develop
residential property. The speed with which that trust and
confidence is rebuilt will be the bellwether for the residential
market's resilience and long-term future.
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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