Brexit fears persist, but no threat to London market as investment haven

Though concerns that greeted Britain’s vote to leave the European Union seem to be waning, the fears of its possible impact on the London property market as an attractive location for commercial property investment in Europe still persist.

But experts and a new research insist that these fears are needless and baseless, even though some banks and financial organisations may move out of the city as a demonstration of their fears.

That London will remain an attractive location for commercial and even residential property investment is a piece of good news for foreign investors, particularly Nigerian business elite who, unconfirmed report says, control a sizeable percentage of the London rental/buy-to-let market.

Businesses that may leave London could be looking to take space in other European cities such as Frankfurt and Berlin because of Brexit, but the outlook report from real estate services firm, Jones Lang La sale  (JLL) suggests that the numbers will be small.

JLL predicts that 2017 will see no real clarity on the eventual Brexit deal and that the UK economy will grow less strongly than in recent years but will still outperform most other developed nations.

It also forecasts that there will be an increase in investment volumes from last year and the continued momentum of the alternative investment market will not be diminished, particularly the retirement living sector.

Shelley Frost, head of consulting at JLL, says post Brexit London will still be seen as an attractive location due to availability of skills, flexibility of labour laws and the advantages of language, describing government figures suggesting that up to 90,000 jobs may leave the UK as scaremongering.

Propertywire, an online property platform, quotes Frost as saying that there will be increased demand from fintech while take up in the tech sector will remain robust because of the growing fintech cluster that seen in regional locations such as Manchester.

According to Rob Wilkinson, chief executive of AEW Europe, there is a long way to go before cities in France and Germany could compete with London, saying, “from an investor perspective, we didn’t see a great fire sale of London property post referendum and this year we should see an increase in investment volumes”.

Jon Neale, head of research at JLL UK, believes that the spotlight for this year will be on the big six regional cities due to public realm improvements and far more students choosing to stay in cities such as Birmingham and Manchester after graduation.

“There is still a huge divide in skills and productivity between the North and South in the UK and this needs to be addressed through policy. The danger is that the government’s agenda may become too full with the Brexit negotiations to address these”, he explained.

Ollie Saunders, lead director of alternative investment at JLL, predicts that 2017 will see alternatives outperform the rest of the market with healthy income returns and an anticipation of yield compression. “Alternatives made up more than 25 percent of all commercial transactions in 2016, up from 10 percent in 2010. They are a meaningful and maturing part of the UK property market,” he said.