A three tier commercial property investment market seems to be emerging following the UK’s decision to leave the EU, according to specialist real estate asset management company Blue Marble Asset Management.
Tim Matthews, Chief Executive of Birmingham-based Blue Marble Asset Management, says institutions, property companies and private investors are all reacting differently in the post-Brexit market.
Mr Matthews says: “The institutional sector had been very cautious in the run up to the referendum. Immediately post-Brexit a number of funds reduced their portfolio valuations and suspended trading in their property fund shares in a bid to stem redemption requests which would have necessitated significant stock being brought to the market, creating an imbalance between demand and supply which could produce downward pressure on values. The situation still remains uncertain although some institutions have recommenced trading and are also pursuing disposals which are reported to be attracting strong interest.
“The primary issue as far as institutional activity is concerned is whether any bulk disposals will lead to price reductions which could ripple throughout the market generally.
“Early indications suggest that some property companies are looking to capitalise on the uncertainty in the market and are attempting to negotiate discounts on purchases on an opportunistic basis. There is currently no substantial evidence to suggest that this strategy is being successful. However, there are also a number of property companies which have elected to take a ‘wait and see’ stance before re-entering the market as they wish to determine the likely value trend going forward.
“For the past 12 months or more private investors have been chasing yield as a priority and early indications suggest that this remains the case now as it was pre-referendum. Recent commercial auctions have all reported strong sales with prices largely unaffected. Auctions are generally the domain of private investors. It therefore seems the sentiment in this market remains positive, at least for now.
“It will clearly take some time for the true post Brexit trends to emerge. The key issue will be whether occupier demand remains strong as this will undoubtedly fuel confidence amongst investors.
“As above, it is still too early to detect a trend in demand, and there have been examples where deals have fallen through due to occupiers withdrawing either because they are shelving their plans or, as is more commonly cited, ‘waiting for the dust to settle’.
“A great deal of sentiment is London-centric, in particular fuelled by concerns over the prime West End and city office markets which have been forecast to flatten or deteriorate following several boom years (such forecasts being made well ahead of the referendum result).
“At provincial level there are still good examples of occupier activity post referendum across the main sectors and as noted above, private investors seem to be carrying on in a “business as usual” manner at the present time.
“As a result at Blue Marble we are continuing to look for and acquire commercial property for our clients, as the current uncertain market conditions present opportunity while demand for investments is in more of a state of flux.”
