DATA: The true impact of Brexit

The number of UK commercial property deals signed since the announcement of the EU referendum has fallen by nearly a fifth and properties took longer to let or sell in the aftermath of the Brexit vote, EG data shows. TRANSACTIONAL VOLUMES FALL Transactional volume across all types of property fell by 18% in H2 2016 compared to the same period in 2015. THIS CONTINUES A DOWNWARD TREND BUT VOLUMES ARE NOW PLUMMETING This is a continuation of the downward trend in overall deals volumes, originally coming to the fore in 2015 due in part to a lack of supply in key markets, such as national industrial property and London offices. This trend appears to have been exacerbated by the uncertainty caused after the vote to leave the EU in June, with long-term decisions on property being deferred while new operational realities become clearer. SLOWDOWN WAS NATIONWIDE BUT NORTHERN IRELAND SAW THE BIGGEST DROP The slowdown in activity was nationwide, with all 12 EG-defined regions seeing a downturn in overall volumes. Northern Ireland saw the biggest immediate drop, with deals volume 38% below that which it saw in H2 2015, whilst Yorkshire and the North East came out the most resilient, seeing a 4% and 5% dip respectively – thanks to a year-on-year increase in activity across the industrial sector mitigating drops in offices and retail. PROPERTIES ARE TAKING LONGER TO SELL OR LET Properties marketed in the quarter immediately after the Brexit vote were markedly less likely to fly off the shelves, with just 5.8% of properties actively marketed between July and September transacting within three months. This represents a continuation of the slowdown in deals flow from the previous quarter, and a dip below 6% for the first time since the end of 2014. The best time to have brought a commercial property to market over the last four years was, in fact, Q1 2016 – with a 7.3% chance that it would be snapped up within three months. QUICK INDUSTRIAL DEALS LED TO A SPIKE That spike was due to the healthy appetite at the turn of the year for quick industrial deals – which had been accelerating sharply since the latter part of 2014. Since then, newly marketed industrial properties have mirrored the downward movement in retail and office transactions in taking slightly longer to get off agents’ books. RENTAL GROWTH SLOWS IN OFFICES AND INDUSTRIAL Rental growth slowed across office and industrial units nationwide, as limited supply protected against a year-on-year contraction in the immediate term. Looking forward industrial warehousing is likely to be the most insulated against a drop in rents as supply constraints hit hard. Industrial property in general proved itself most resilient, with a 10% drop in deals volumes compared to 21% for both office and retail properties – with some regions even seeing an increase in activity. To send feedback, e-mail graham.shone@egi.co.uk or tweet @GShoneEG or @estatesgazette This article was first published on 16th March 2017