March 29, 2018
Occupiers are less concerned about Brexit than they were a year ago, according to a new CBRE research survey of over 100 major occupiers across Europe, most of whom have pan-European or global operations. By late 2017, the proportion of European occupiers worried about Brexit having a ‘very significant’ impact on their operations in the UK had dropped from 15 percent to 6 percent compared with a year earlier. The proportion of occupiers worried about Brexit having a ‘significant’ effect has also fallen, from 38 percent to 33 percent, meaning that the number of occupiers worried about negative impacts from Brexit has fallen in total from 53 percent to 39 percent. A year to the day on which Britain aims to exit from the EU, global real estate advisor CBRE has published an updated guide unpicking some of the key real estate impacts of Brexit.
Other anticipated implications include:
Economy: Brexit uncertainty will continue to dampen confidence and growth, and currency-induced inflation has not yet fully dissipated, slowing consumer spending. But the weak pound has attracted international real estate investors and tourists to the UK and boosted domestic exports, increasing demand for the office, prime retail, industrial and hotel sectors.
Trade access: Trade can happen without any agreement in many areas but costs would rise; the most exposed are highly-regulated sectors which cannot trade at all without licenses. The impact on financial services may present particular risks for Central London. In the logistics sector, supply chains and warehousing may need to be reorganised.
Labour market: Net migration may fall and firms may pause on hiring, reducing demand for office space; after 2021, new controls could produce particular shortages in construction, retail, healthcare, and hospitality, raising occupier and developer costs.
Regulation: Although EU law will be imported into UK law at the point of exit, the UK Government is examining whether EU-derived law could be adjusted after the UK has left the EU. But in the short term, the need to get Brexit legislation through Parliament means there is little space for major real estate legislation (for example planning law or infrastructure projects).
Miles Gibson, Head of UK Research at CBRE comments: “2018 is crunch time for Brexit, and exiting the EU continues to be a long and complex process with many twists and turns. Our current view is that it is more likely than not that the UK will, in the end, secure an agreement with the EU and thus that a ‘hard exit’ will be avoided. Occupiers seem noticeably less concerned about Brexit now than a year ago. However we still expect 2018 to contain its fair share of surprises.”