But while the immediate impact of the vote for the UK to leave the EU was clear, it is more difficult to assess potential consequences over the longer term.
Overall, it is likely that central London will be most affected as businesses in the financial services sector consider their position. It was recently reported in the press that around 10 million sq ft of office space in the finance sector are subject to a break clause or expiry by 2021. Some of this space must now be at risk.
In recent months some developers paused work on projects as they awaited the outcome of the referendum. With the country backing Brexit, it is likely that many developers across the country will relook at their pipelines of projects and make fresh assessments of viability.
The number of transactions in the real estate market was already falling in the lead up to the referendum. It was widely expected that, given the institutional appetite for UK real estate, demand would increase once the result was known. But the uncertainties caused by the shock vote to leave the EU will likely lead to a relative cooling of demand from institutions. This could give private investors an opportunity to buy good income-producing assets at a favourable price.
The reduction in the value of the sterling will no doubt have negative consequences for the sector. But some of the immediate downsides may, over time, be counterbalanced as a weaker pound could boost overseas investors’ interest in UK real estate.
Until the financial markets have settled and the international business community has had some time to consider their position, the future of the real estate market will continue to be uncertain.
