Brexit uncertainty puts dent into commercial real estate market

Michael Lloyd

December 12, 2019

Brexit uncertainty has contributed to a £20.6m drop in the daily amount spent by commercial buyers on real estate transactions across England and Wales since 2017, Search Acumen has found.

Using the latest available HM Land Registry (HMLR) data, its analysis shows that commercial buyers across England and Wales have spent an average of £249m every day from January to August.

This is down by 6% from the equivalent period in 2018 when £265m was spent each day and down by nearly 8% from £270m in 2017.

Caroline Robinson, commercial real estate business development manager, Search Acumen, said: “Politicians have frequently told us how bad things could be without a Brexit decision, but the commercial real estate sector is already feeling the pain of indecision every day.

“Our study has likely only confirmed what the industry has known for a while – 2019 has been a year of ‘wait and see’ as more transactions have been cancelled or put off until after the General Election and the Brexit decision has been made.

“Simply put, less commercial real estate business is being done this year as so much about the country’s economic outlook and future remains up in the air.

“However, while we all wait for a Brexit outcome to release the bottleneck that the political situation has created, it is heartening to see that ‘mega’ commercial deals of more than £50m and £100m are still in vogue.

“This tells us that there is still plenty of confidence in the UK real estate sector and that for those who can be a part of such a large scale of development and sale, business is still good.”

In 2017, the busiest day of the year, 12 October, saw £4.9bn spent by commercial property buyers, 37% more than 2019’s biggest day so far which saw transactions worth £3.1bn completed on 29 July.

2018’s busiest day also registered 4% higher with £3.24bn spent on 26 November.

There have been 399 commercial real estate transactions on average per day this year between January and August, down 5% from 420 in 2018, and down 7% from 429 in 2017.

While daily transaction activity has been hit by Brexit uncertainty, appetite for the largest commercial property deals remains.

HMLR figures show £100m plus transactions are at their highest level of recent years, with 65 deals for £100m or more recorded in England and Wales so far this year.

This is 30% more than the full year last year.

However, while mega commercial real estate deals have continued to be transacted in 2019, deals over £1m in value have fallen.

Only 7,443 deals valued between £1m and £50m have been transacted during the first eight months of 2019, just 56% of the 13,238 completed during the 12 months of 2017.

Robinson added: “With indecision likely to remain into 2020, now is the opportunity for firms in the commercial real estate sector to assess how they can be best placed to take advantage of an eventual upswing in the amount and volume of transactions.

“Today, too much real estate business still takes place on paper and is hugely inefficient.

“But, by integrating big data and smart automation into transactional processes that haven’t changed in decades, developers, planners and their lawyers can elevate themselves into a consultancy role.

“The smartest real estate firms are gearing up for more business in 2020 by looking at how to make real estate transactions faster, more accurate and more conducive to 21st century business.

“Those that can offer clients a faster and simpler way of transacting property will be well placed to win. The full digitisation of the real estate industry is the future, so the time to act is now.”

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