Experts assess Brexit impact on NW property
If the response to the EU referendum result on Friday was of utter shock, this morning has seen the property sector begin a waiting game to see the fate of projects and clients as the region enters a period of great uncertainty. Place North West rang round a cross-section of advisors for their evaluation so far.
Steve Burne, managing director of AEW Architects: “It’s still too early to say what the impact of the referendum result will be, as clients aren’t sure what’s happening; they’re finding out if investors are still acquisitive or need a period sitting on their hands.
“We’re confident about our flow of projects as we work in robust sectors such as restaurants, with clients like McDonald’s, which are not as affected by economic change.
“Logistics is also expected to stay strong, as people still need to buy things and move those things around.
“The core issue is if Britain and the North West is still an attractive area to invest in for US and Middle Eastern funders. In Manchester, many projects are delivered by private companies, which are self-sufficient and these will continue.
“A lot of deals have Brexit clauses and these are being triggered, but we don’t know if these deals will stop completely or be renegotiated on less good terms.
“What we need is strong leadership from government and businesses. Don’t talk stuff down, we need to talk stuff up.”
Mark Rawstron, senior director at surveyor Bilfinger GVA: “While the market woke up on Friday in total shock, the markets will calm, and property is a good asset in times of volatility. There’ll be a short term adjustment in pricing, but we’re waiting to see what that might look like. For Far East investors, it won’t make a difference, the EU referendum was a sideshow and won’t have much impact on their decisions.
“Things will quickly calm down once the headlines calm down.”
Jonathan Mills, investment agent and partner at Metis Real Estate Advisors: “The property market is still adjusting. One thing people don’t like is uncertainty, and we’ve just landed in a world of uncertainty. The feedback on Friday was utter shock, no one expected an out vote, and they might have made contingency plans but no one expected to use them. This week will be a deciding time as the impact will be monumental, there’s too much change at once. While the pound is softening, that looks like better value to non-Sterling investors, but they still don’t know enough in the short term to make investment decisions.
“There will be a pause as people digest what’s going on. If they want to renegotiate a deal, they don’t know what to renegotiate to. We’ve completely removed the frame of reference, we can’t attribute an appropriate adjustment either way, and it’s difficult to say what values will reduce to.
“We’re currently in a vacuum, and that is the biggest fear, that nothing happens and there’s stagnation.
“No one will sign a lease on an office or commit to anything until we have more certainty, and there will be a holding back on launching buildings for sale while we wait for more clarity.”
Will Lewis, director of advisor OBI Property: “From an investment perspective, there may be nerves in the short term, but from the occupational market perspective, in the four or five months in the run up to the referendum when institutions and investors sat on their hands, we didn’t see that happen for occupiers.
“Devo Manc has put the city in a strong position, but even prior to that, in the recession the local economy was strong. We’re not a market reliant on big one-off deals, and the type of occupiers that make up the market means that it won’t be swayed by an EU exit.
“From a funding perspective, no one knows what the answer is yet. The out vote adds an extra level of uncertainty, and where investment is already about assumptions, there’s now an added layer of doubt.”
Dan Mitchell, partner at planning consultant Barton Willmore: “The two main aspects here are the impact on the UK planning system, and market confidence.
“Nothing in the UK planning system will change overnight. The main aspect affected by EU legislation will be the Environmental Impact Assessments, but the Government has been looking at reducing the pressure caused by this for some time. No big change is expected; we will have to create our own environmental regulations covering all the same legislation anyway.
“In terms of market confidence, and implications on the government’s growth agenda, it’s still too early to say. Clients may stall, but we haven’t seen that yet. And while housebuilders’ shares dipped, that’s a long-term game. The need for housing is strong, we need houses with or without Europe.
“The bigger question is with the EU spend on transport and infrastructure, will schemes stall across the region in the short term?”
Andrew Pexton, senior director of logistics at Bilfinger GVA: “There will be short term volatility, especially on yields which may move out. Short term pricing will be the issue but property is a long term commitment for the investor, owner occupier or tenant.
“The distribution sector is probably more resilient, however pricing for any new leasehold design-and-builds could be sensitive due to yields at practical completion unless forward funded. We have ongoing requirements from distribution clients who have confirmed that their requirements are still active.
“Manufacturing is more sensitive dependent on sector and exposure to Europe; one company is meeting to decide whether or not to purchase a property on a deal close to exchange. Another is still proceeding with a new lease and exports mainly to Europe.
“Manufacturing-led distribution may be affected gradually as service contracts for logistics operators may be reviewed or renewed for shorter periods, and this will have a knock-on effect on the length of lease term and the properties that will consider short leases.
“There is still a shortage of built stock, current demand will help the market remain at current or higher rental levels. Due to potential reticence to undertake speculative development (as no one knows where yields will be in 12 months) this is likely to stall further speculative build in the short term. This will be positive for units that are currently in build.
“Business can’t stop because of what has happened, companies will take a measured approach to investment/relocation.”