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Post BREXIT: commercial property market latest

Post BREXIT: commercial property market latest

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It is nearly three months since we all read the dire headlines that followed the EU referendum in June. But how has the commercial property market actually been affected?

The immediate political and economic shock following the vote to leave the EU caused a great deal of concern. But has the formation of a new government and the Bank of England’s recent decision to extend its programme of quantative easing and reduce the bank base rates to 0.25%, succeeded in improving business confidence?
The commercial property market in general:
The crash in the value of leading UK property funds resulted in five of them, responsible for more than £14bn, suspending redemptions as investors sought to sell, for fear of values falling further. These funds have subsequently been steadily selling prime assets although some fund managers have been calling for a co-ordinated approach to re-opening for business. Caution is being taken to avoid a rush of redemptions on any one fund, which could cause further liquidity issues. 
At the same time, the weakening value of sterling has encouraged direct property investment from foreign investors into London and other larger centres, boosting these markets.
The local commercial property market in Suffolk:
Because of the timing of the referendum -  directly before the traditionally quiet holiday season - it is difficult to judge with any certainty how much influence the vote to leave the EU has had on the local market.  We have heard of some larger deals in London falling through with ‘Brexit’ clauses being exercised, but locally, the vast majority of commercial property transactions Fenn Wright agreed before 23rd June have proceeded to a successful completion, without renegotiation. None have so far been scuppered as a direct consequence of the referendum.  
Generally, occupier demand is still positive. Some logistics businesses have expressed concern about the risk of a decline in imports and increases in fuel prices remain a concern for them too. Manufacturers on the other hand, are looking at new export opportunities as the weakness of the pound giving them a competitive edge.
Interestingly we have seen more activity in the office market over the last few weeks than in previous months, particularly in the 2,000 to 5,000 sq ft bracket. Is it possible that business leaders have put aside the shock of the result and decided that the show must go on? Having delayed any moves until the referendum had happened, maybe they feel they cannot defer for another 2 years to see how matters may unfold. The demand for office space is largely for scarce, high quality Grade A/B accommodation. Discerning occupiers are looking for modern, efficient space that will be attractive to employees as professional and technical staff are still in short supply.
There has been no discernible change in the retail sector, and the leisure market appears to be continuing to grow.
Developer clients embarking on speculative commercial schemes are still proceeding, although achieving a good percentage of pre-lets is perhaps now more important than before. 
All of the local banks we do business with confirm that they remain keen to lend into the property sector, with interest rates now more attractive. The reduction in base rates has also fuelled demand amongst cash-rich investors looking for sound, secondary investment opportunities.
Alistair Mitchell MRICS, the Fenn Wright partner who heads up the Ipswich and Suffolk commercial property team says: “Time will tell as to what impact Brexit will have on the local market but there certainly appears to be a widely held view that the glass is half full. And we won’t allow ourselves to be talked into another recession. 
“The immediate shock is over and a more measured approach now appears to have been adopted. Opportunities will present themselves and those who are able to take advantage of these and adapt to emerging market trends will continue to thrive.”
To discuss any aspects of acquiring, selling or letting commercial property in Ipswich or other areas of Suffolk, please get in touch with Alistair Mitchell.
You can see all commercial property currently available with Fenn Wright here.

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