Nery Alaev

Commercial property more likely to feel Brexit impact

Nery Alaev writes about Brexit’s ongoing impact.

A new set of analysis and data has indicated that the commercial property market in the United Kingdom is most at risk from the fallout of Brexit.

In a rather cruel and ironic twist of fate, it seems that a market that was close to overheating and has caused heightened social tension is now being rapidly cooled by Britain’s exit from the EU.

Will this cooling effect prove to be damaging for London in the long-term? I’ve decided to look further and find out.

Nery Alaev on Brexit's impact on real estate

Brexit’s impact is still sharp.

Negative outlook

The data, compiled in a report by S&P Global Ratings, states that commercial real estate investment companies exposed to financial districts in the UK capital are at significant risk. This is thanks to falling valuations and rents in those areas.

Residential properties in the capital’s central area have also suffered alongside commercial real estate. The report points out that:

“High end and luxury apartments in central London were already experiencing some negative trends in the past few months.

We would expect this situation to continue given that this segment relies more heavily on foreign investors, which we expect may be even more hesitant buyers now, despite the fall in sterling.”

The report implies that the hesitance around Brexit that I wrote about previously has now manifested.

Struggles for home builders

While the report does stress that there is pressure on commercial property, it also mentions the new pressure on home-builders.

The report states:

“We understand that home builders are monitoring closely their weekly sales rates, footfall to showrooms, and mortgage approval rates, as key indicators of operating performance.

These indicators seem to have remained relatively healthy so far, in particular in the affordable segment, and mortgage availability continues to be robust as opposed to the previous downturn in 2008/2009.”

In summary, it seems a lot of sectors are feeling the pain of Brexit – this will not let up any time soon.

Nery Alaev

Nery Alaev is the current Director of ESN Investments GmbH, which engages in acquisition and development of commercial and residential property in Germany and Austria.

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