Nery Alaev

Experts comment on Brexit shock vote

Nery Alaev lists reactions in the real estate sphere to the ‚Brexit‘ vote.

A recent article has compiled a list of reactions made by senior real estate professionals on the shock decision by the United Kingdom’s electorate to leave the European Union.

In a unique post, I’ve decided to compile several of the quotes and the respective organisations with my own reaction to them in tow.

John Forrester, EMEA chief executive of Cushman & Wakefield:

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Manchester, UK. The country’s real estate will be affected.

“The property sector has probably followed the EU referendum more closely than any other industry and has witnessed the impact of the uncertainty and speculation in the run up to the vote.

“While the decision of the UK electorate is now confirmed, a period of further uncertainty is unavoidable as businesses, the financial markets and the political establishment in the UK, Europe and globally come to terms with what this means.

“Clearly the impact of this decision will be felt beyond the UK’s shores as the UK is the EU’s third largest market by population. We are therefore entering a period of unprecedented change as markets and sectors adapt. What is clear is that in any scenario there will always be opportunities and those will become clear in the weeks and months ahead.”

Mr. Forrester stresses that there is now uncertainty, but opportunities will always be present. His quiet optimism is refreshing in a time of great uncertainty, both politically and economically. Whether useful opportunities are presented however, is unknown.

Guy Grainger, CEO, EMEA, JLL:

“The vote for Brexit brings an unprecedented new dawn for Britain, and for Europe. In the short term we are now in a period of pronounced uncertainty.

“Even if it is effectively ‘business as usual’ for the UK in terms of trade and legislation until 2018, such a major change will inevitably create uncertainty in the real estate markets. In the event of a well-managed exit these impacts will be largely confined to the next two years.

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Luxury residences in Birmingham. How will homes fair?

“In the short term we may see a weakening in occupier demand as businesses to more time to consider investment decisions. The impact on rents may be limited by tight supply, but activity will be adversely hit while initial uncertainty about direction and timing continues. Investor sentiment may also remain subdued in the short to medium term, although a drop in Sterling may provide a moment in time for some opportunistic international investors. For property markets, the initial correction may be most severe but should be followed by an upturn as opportunities re-emerge in UK core markets and benefits of weak sterling are recognised. Sentiment and relative pricing will be key.

“This event is a trigger for many investors and occupiers to make adjustments to their real estate strategy. Some decisions may continue to be put on hold, or reassessed entirely. At the same time, we expect there may also be some positive implications for other mature markets in Europe and, potentially. In the light of currency movements, international investors may be attracted to certain parts of the UK market. This could be relatively short-lived at least until currency volatility subsides and notwithstanding the underlying uncertainty which will colour sentiment for at least a couple of years.

“We have been keeping close to our investor and occupier clients on the issue of the EU Referendum and their likely approach in the event of a Brexit vote. One thing is absolutely certain: clients across the board are going to need access to up-to-date, comprehensive data to inform their real estate strategies. JLL’s global research team taps thousands of data points every day. With hundreds of years of combined experience in the team, the real skill is in the ability to interpret how everything from global capital flows to REIT performance, interest rates to labour market data, and investor and occupier sentiment to demographics and migration will play out in real estate.“

Mr. Grainger’s quote places importance on changes to the value of the Pound Sterling and how changes in its value may affect decisions in real estate.

He goes on to point out that clients of JLL will need information to update their strategies on a constant basis – this may end up being detrimental to JLL and other organisations given that it will cost them a lot to update their clients on such a regular basis on with such sensitive information.

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London, UK. Will the capital weather the storm?

Richard Lim, chief executive, Retail Economics:

„In the wake of Brexit the world has become a much more uncertain place with the immediate future likely to be plagued by volatility and fear. As households digest the implications, initial concerns will be centred on the strength of the economy, job security and political instability which will choke consumer confidence.

„In early trading the pound has fallen to a 30-year low which in part is likely to reflect an interest rate cut being priced in to markets. A weaker pound will put intense pressure on import costs with shoppers likely to see the initial impact in the way of higher food prices given shorter supply chains.

„Economic data on spending, jobs and confidence will be under close scrutiny as repercussions unfold in the coming weeks.“

Richard Lim is more pessimistic, highlighting the immediate negative effects of the decision – he also indicates high levels of scrutiny on information and data, similar to Guy Grainger.

In summary

In summary, key themes among the experts are insecurity, uncertainty and the importance of regular updates and the flow of information.

Europe’s property sector is in for a rough ride – the organisations at the heart of it now have a momentous job to do.

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.