Demand for UK commercial property plummets ahead of referendum
Global demand for British commercial property has plummeted to its lowest level on record as businesses postpone investment ahead of the EU referendum, according to a new report .
A study by the Royal Institution of Chartered Surveyors (RICS) examining the pros and cons of Brexit has revealed a slowdown in international demand for UK office, industrial and retail property since the referendum was confirmed in 2015.
The RICS demand indicator shows just 5% of members surveyed reported increased interest from overseas companies over the last three months, a drop from the second quarter of 2015, when the figure was at 36%.
The demand indicator among international investors for UK commercial property is now at its lowest level since RICS records began in 2014.
RICS chief economist Simon Rubinsohn said: "There is no doubt that since the EU referendum became a certainty following the General Election last May, we have seen a decline in interest from overseas investors in UK commercial property. At least in the short-term, we know that international retailers and service providers are finding the UK market less attractive."
Uncertainty linked to the EU referendum was cited by 38% of RICS members working within the sector as the reason why major international retailers and other businesses have been nervous of investing in Britain.
Should Britain leave the EU, 43% of respondents felt that it would have a negative impact on the commercial property sector and only 6% said a Brexit scenario would have a positive impact.
However, RICS' EU Referendum Paper says that, across the board, long term steady growth is still predicted across rural, land and built environment sectors.
Mr Rubinsohn added that the development need not be seen as negative.
"We need not view this as a negative, as a result of the market dampening, business rents are also rising at much slower rates, which suggests that we might soon be seeing more favourable conditions for entry and business growth," he said.
In addition, RICS said that despite the National Farmers Union (NFU) this month coming out in favour of remaining in the EU, largely due to concerns around the loss of Common Agricultural Payments (CAP), Brexit may benefit the forestry sector.
RICS rural chair Gerard Smith said: "Forestry has benefited from the uncertainty around the EU and the consequential weakening of the pound. The second half of 2015 saw a strong GBP performance against the Euro, and this impacted on the competitiveness of UK domestic supplies due to the better prices of imported timber.
"Continued uncertainty from a Brexit could weaken the pound, so we could see resurgence in the domestic timber market. This could lead to UK timber being an enticing investment option for those looking into the UK - maintaining jobs, output and value."