EU: Bilfinger GVA’s sector-by-sector predictions

Bilfinger GVA believes the impact on the office market will vary considerably across sectors.

  • 62% of respondents in Bilfinger GVA’s internal staff survey conducted before the EU Referendum thought there would be a decrease in occupier demand for financial services, rising to 76% in London
  • 75% of London-based respondents thought that Frankfurt’s threat as a competitor to the City of London would increase…
  • …but nationally only 39% thought that demand for professional services would decrease

The retail sector will likely see some impact from a fall in consumer confidence in the short term. However, the structural changes still underway across this sector – rise of food and beverage, online retail… –  will continue to be the key driver.

The impact of the leave vote on the distribution sector is likely to be limited, as demand in this sector is being driven strongly by structural change in the domestic retail market. However, demand from manufacturing-led logistics and industrial space is likely to be impacted if trade volumes fall.

  • 69% of respondents to the survey felt occupier demand in the manufacturing sector would fall…
  • …although only 39% saw demand for professional services, as well as technology, telecoms and media, reducing, implying that these sectors remain more insulated from any impending effects of Brexit

The leisure sector may well benefit initially from this vote, as a probable fall in sterling would increase the cost of holidays abroad. However, the sector may also experience a reduction in demand in the long term if economic growth slows.

Greater UK control over immigration following the leave vote could make it harder for overseas students to access UK universities, affecting the high-end student accommodation market.

The UK has already seen a slowdown in investment activity, as purchasing decisions are delayed until after the vote. Investment transactions for Q1 are less than £12bn, the lowest since Q1 2014. Q2 will likely be even more noticeably down on last year.

Jason Sibthorpe, senior director and head of transactions and capital markets, comments: “The leave vote will not change the fundamental benefits of investing in UK commercial property. While the continued uncertainty will likely have a minimal effect on the prime market, the secondary market remains at risk of a more prolonged slowdown, and a potential upward shift in property yields. This vote could cause UK gilt yields to rise, narrowing the gap with property yields.”

Sibthorpe adds: “On the plus side, the likely fall in the value of sterling will make UK property cheaper for overseas investors, who currently account for half of the value of commercial property purchases.”

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