Thursday 23rd June 2016 – a date the British public will forever remember. This date marked the end of the relentless BREXIT campaigns, concluding with Britain leaving the EU. Whether voting to remain or leave, those working within the property industry knew that this decision would have a direct impact on our market. My blog is going to open discussion on the ongoing effects of this decision and the changes that may occur in the future.
Immediately after the referendum, predictably we observed a pause in the market; with the UK commercial property sector seeing the lowest levels of investment in the last four years. Once the outcome was announced, REITs and foreign investors both waited, wondering what the next step would be and the overall impact BREXIT would have. A number of major deals regarding notable landmark buildings fell through at the last minute, making the market as a whole, concerned with what was to come. It was positive to witness that within six months, a slow rise in investment came, with foreign investors beginning to take advantage of the weaker pound. However, for British property businesses it was more difficult, they continued hesitantly and were considered in their acquisition strategies.
Over the last year, we have seen announcements made by two of the most renowned property institutions; British Land and Great Portland offered share buy-back initiatives. This meant an almost £400million combined withdrawal from the market. The reasons why can only be answered by the businesses, British Land Investment commented ‘Currently, opportunities to purchase at attractive returns are more limited, and investment in the company’s shares at the discount rate, offers better value than further asset acquisitions’. However, was this decision made purely because of BREXIT, or was it an initiative taken because of the astounding prices properties have recently been acquired for? Was this a sign that REITs were no longer interested in the UK market and saw limited opportunities for investment into office space?
However, while the REITs are not making major acquisitions, the amount of global investment into the UK has skyrocketed – in the first half of this year alone we saw over £8billion worth of foreign investment. This has included the buyout of a number of major prestigious sites including more than 10 single asset deals in London that are circa £100million. This has also included the acquisitions of two properties for over £1billion; 20 Fenchurch Street and The Cheesegrater, both sold by REITS and bought by foreign investors. This continues with regular announcements including Blackstone Group planning to buy the Cannon Bridge House headquarters for over £250million.
The question is, will this investment continue? With Asian Investment struggling to cope with tighter capital controls and increasingly wary government regulations, including the new Chinese initiatives of restricting all foreign property purchase exceeding US$1billion by state-owned enterprises – will the influx of foreign cash end?
What are your thoughts?
Seb Osborne, Facilities & Building Management, Foundation Recruitment