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How Has Brexit Vote Affected Commercial Property?

Both the investment and occupier sides of the market have been affected by the change in sentiment and both rent and capital value expectations have dropped.

The commercial property market in the north west has seen a drop in confidence and investor demand following the Brexit vote, according to the latest RICS UK Commercial Property Market Survey.

Both the investment and occupier sides of the market have been affected by the change in sentiment and both rent and capital value expectations have dropped.

Jeff Matsu, RICS Senior Economist, said: “Political and economic uncertainty in the aftermath of the referendum result has clearly dampened sentiment in the commercial property market, with the tone becoming visibly more cautious right across the UK.

“Nevertheless, following several years of strong capital value and rental gains, momentum had already appeared to be slowing.

“Whether or not the sharp deterioration in the RICS survey data is a kneejerk reaction that will unwind as the result is digested, or the start of a more prolonged downturn, remains to be seen.”

During the second quarter of the year (Q2 2016) investment enquiries fell across the north west with only 15 per cent chartered surveyors in the region reporting a rise in investment enquiries.

All sectors covered by the survey suffered a drop in investor demand including retail, industrial and offices, and foreign investor appetite declined at an even faster rate with 28 per cent more respondents to the survey seeing a drop in interest.

With investment demand falling right across the UK, capital values are expected to decline, albeit modestly, over the year ahead in almost all areas of the market throughout the UK. Values in the secondary retail and office segments are expected to see the most visible decline.

Political and economic uncertainty is also hitting confidence on the occupier side of the north west’s commercial property market.

Demand for all commercial property types fell during Q2 with only 4 per cent of respondents in the north west reporting a rise in demand from potential occupiers. On a UK-wide basis, occupier demand failed to rise for the first time since 2012.

Charles Fifield of Fifield Glyn in Cheshire said: “Enquiries seem to have slowed over recent months. It is unclear whether this is because of the decision to leave the EU or a natural slowdown following a busy period. The aftermath of Brexit could be delaying longer term business decisions such as property moves and acquisitions.”

Martin Walton of Waltons Commercial in Tameside added: “Until the Brexit vote, the market was making steady progress except for offices, where more quality stock is needed.

“It is too soon to tell if secondary property will be affected by the vote and if so by how much. All predictions in this survey might be subject to considerable revision in the next quarter.”

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