Arguments about the potential effects of Brexit continue to rage as we approach March 29th. In the wake of the Bank of England’s decreased forecast of economic growth for the year ahead to 1.2 percent, could the future be as dicey as some expect?
The end of 2018 saw a Bank of England warning that capital values on commercial property could fall by 27% over five years under a “disruptive” Brexit and by 48% should it be “disorderly”. However, contrary to this, 2018 saw £16.2 billion invested in central London’s commercial offices. To draw comparison with this, £14.3 billion was invested in Manhattan, £12.1 billion in Paris and £8.4 billion in Hong Kong.
Over the last year the level of office uptake in London has increased by 14%, the highest figure since 2014. London has continued to perform in its commercial property market, with more than 14 million square feet being taken up last year. A large proportion of this statistic is made up of firms in the technology, media and telecoms sectors. These industries are driving the start-up economy and making a name for London as a start-up hub.
So clearly London is still a strong player in commercial property. Nationally, the South East tends to reflect London’s economic performance to a certain extent. The area benefits from organisations drifting out of Greater London and the economic spending power of suburban commuters. So while the rest of the UK may display more concern over the effects of Brexit on commercial property, Surrey and Hampshire has a lot to feel optimistic about. Clearly, we share this local optimism at Curchod & Co.
Health of Retail
Local economics often hang on the performance of retail locations. A healthy high street gives organisations the confidence to choose a town to locate their HQ or central office. This comes down to household spending. The South East experienced an unexpected boost to growth over 2018, up 1.9 percent on a year ago. As we see new retail endeavours opening across key towns like Farnham, Camberley and Woking, we can remain confident in the health of our local area.
The country’s looming Brexit is appearing more and more in contract and lease wording. What’s known as a ‘Brexit clause’ quickly became a part of commercial property valuations after the referendum result. This stipulates that values cannot be guaranteed following March 29th. It’s understandable for both tenants and landlords to feel risk-averse when so much about Brexit is still unknown. This is why it’s key to work with experienced property professionals and negotiators who can work through what is required. The wealth of knowledge that we boast at Curchod & Co means that our clients can approach March 29th in contractual confidence.
One aspect that businesses remain unsure of is the impact on international businesses travel. So while there remains a possibility that visitors to and from Europe may require visas in addition to passports, it makes sense to remove other obstacles to hassle free travel. In this way, locations such as Woking, which enjoy direct and easy access to both Gatwick and Heathrow can boast added commercial value.
Over the coming weeks, we should expect wildly contradicting statistics and predictions. So one course of action is the only path that remains. That is to remain resilient, keep doing business and see what happens.