Bruised but still standing: London’s real estate resilience

In his latest column reflecting on his decades in real estate, John Slade looks back at the UK’s Brexit vote. By 2016, we were all set again in the London real estate market. We had got through the great financial crisis and London was still the European financial centre. Boris Johnson then, aided and abetted by Nigel Farage, created short-term mayhem with a very large political volte face – deciding to put his support behind Brexit, one might say for his own political ambitions, rather than the country’s best interests. And with that, he managed to turn UK economic stability on its head. Short, sharp shock On 23 June 2016, the UK voted to leave the EU. I remember it well – we had one of our highly regarded “Capitalise” events at BNP PRE ready to run on the Tuesday morning following, with William Hague and other dignitaries set to talk. Of course, none of us had even considered a “leave” vote. Much rewriting over the weekend for all. Come Tuesday morning, we realised the whole city wanted to understand what had happened. With even standing room only oversubscribed, we had to take over the entire 17th floor at BNP Paribas with hurriedly set up TV screens so that those who couldn’t get into the main room could witness the panel discussion live elsewhere. Never had we felt so popular, despite discussing British independence while being part of a European bank (a sign of things to come internally?). Dire predictions of a collapse of London and the UK followed – my fellow BNP PRE directors from Frankfurt and Paris were asking whether I could take them to meet potential corporate tenants who would leave London for their cities because of London’s soon-to-be downfall. I am not sure how our London landlord clients would have felt about that. Brexit on its own created a short, sharp shock to the UK property markets, but there were other macro events which would hit London. The capital was bruised, and is still showing the bruises, but it survived – as we knew it would. Investment activity was hit for approximately 18 months, but by 2018 to 2019 we were once again at record expenditure levels. All nationalities were involved, private equity and property companies were taking advantage of high gearing and interest rates from 2009 until two years ago were between 0.5% and 1% – basically free money! Cultural differences London survived Brexit, it was a wobble not a crash. At BNP PRE, prior to Brexit, I had introduced the acquisition of Strutt & Parker to endeavour to transform us into a top-five agency. Having delivered the acquisition – but having become disenamoured with the ensuing strategy – I left BNP PRE, taking with me a lot of knowledge and understanding about banking, European advisory and the all-too-often discussed UK-FR culture differences. I had some amazing experiences, a successful staff acquisition drive and great French wine. At the same time, we had become profitable and, as a brand, it was rejuvenated and punching above its weight thereafter. During 2017-2019 I was off to private equity as a chairman and partner. A short stop, it being a destination where the model for business was past its best: placing large properties under offer with the aim of raising equity subsequently proved impossible in a more bullish market. The business needed new capital. In the end some of those with whom I was discussing recapitalisation asked me to advise them. In the agency world, Cushman had slightly earlier taken over the rump of DTZ – while crystallising its global number three position in the UK and Europe, it was still some way behind CBRE and JLL. In the UK, some middle-of-the-table players tried to jump by acquisition, not least BNP PRE, but also Avison Young by acquiring Grimleys. Neither have been able to get into the top five. The top two were moving more into professional recurring business, rather than relying on high brokerage fees. Bearing in mind the current state of the market, I think more probably wish they had done so. John Slade is director at Sladesco