Global demand for UK commercial property hit by Brexit fears

Global demand for commercial property in the UK has dropped in recent months to its lowest level on record according to the Royal Institution of Chartered Surveyors (RICS).

Commercial property, London
The RICS report, which examines examining the pros and cons of a possible Brexit, says that, ever since the holding of a referendum was confirmed last year, there had been a slump in international demand for UK office, industrial and retail property, primarily because companies are delaying investment decisions until after the outcome is known of the EU referendum. A survey of RICS members across the country found that just five per cent reported increased interest from overseas buyers this year. A similar survey in the second quarter of 2015 found that 36 per cent of surveyors were reporting increased interest from foreign companies.Simon Rubinsohn, RICS chief economist, said, "There is no doubt that since the EU referendum became a certainty following the General Election last May, we have seen a decline in interest from overseas investors in UK commercial property. At least in the short-term, we know that international retailers and service providers are finding the UK market less attractive."Uncertainty linked to the EU referendum was cited by 38 per cent of RICS members working within the sector as the reason why major international retailers and other businesses have become nervous about investing in Britain. In the event a 'leave' decision in the referendum, 43 per cent said they believed it would have a negative impact on the commercial property sector, while openly six per cent thought it would be positive.Mr Rubinsohn commented, "We need not view this as a negative. As a result of the market dampening, business rents are also rising at much slower rates, which suggests that we might soon be seeing more favourable conditions for entry and business growth."The RICS report said that, whatever the referendum outcome, long-term and steady growth was still predicted across rural, land and built-environment sectors, and that a Brexit might actually benefit the forestry sector.Gerard Smith, RICS rural chairman, said, "Forestry has benefited from the uncertainty around the EU and the consequential weakening of the pound. The second half of 2015 saw a strong sterling performance against the euro, and this impacted on the competitiveness of UK domestic supplies due to the better prices of imported timber."Continued uncertainty from a Brexit could weaken the pound, so we could see resurgence in the domestic timber market. This could lead to UK timber being an enticing investment option for those looking into the UK – maintaining jobs, output and value."

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