07 October 2016

Many in the property industry, and indeed many other fields, packed their bags for their summer holidays this year still very much in shock at the referendum vote in late June. They returned to find that not only did no one really have a contingency plan for this scenario but that many high-profile “Brexiteers” had beaten a swift retreat into the undergrowth.  It was clear that in the wake of resignations, party leadership battles and general mud-slinging, that the then Conservative leadership had not only misread the will of the people but had also got it wrong with their endearingly monikered strategy, “Project Fear”.

For property professionals, it felt like a positive first half of 2016 showing continued improvement from a long recessionary period had been undone overnight. The closing of many large UK funds signified fears at the top of the market which quickly pervaded down to all property sectors. This move along with the significant devaluations and disposals in the market was a very obvious and immediate step to enhance capital reserves and to bolster these against the illiquid nature of the medium as a whole.  
Now, post the traditionally quiet summer period, opinion on the “Brexit” vote remains significantly divided and, with tough rhetoric continuing to come from the leaders of other member states, it will be some time yet before real clarity emerges. 

Foreign investment has cooled into an already overheated London market and during the summer the UK institutions have become net sellers of property in overall terms. It fair to say, however, that the initial panic over “Brexit” has been tempered and the price adjustments made by the funds have largely been reduced showing that sentiment is improving. If nothing else, there is a general air of resignation that the show must go on, so while investment appetite may have been quelled, occupiers still need accommodation, and although the decisions may be delayed, we must be hopeful that these will resurface after a period of quiet reflection.  
What has emerged from the summer is a landscape of historically low interest rates which will serve as a disincentive to retain money on deposit and should spur local investors into taking advantage of current pricing,  attractive returns in property and the favourable costs of funds. It strikes me that within the confusion there is space to make smart investments by looking less at the short-to-medium term macro-economic conditions and focusing on property fundamentals.

As a firm we have already witnessed direct evidence of local investors in particular, reflecting a “business as usual” attitude. Osborne King has just concluded the sale of Lesley Buildings, a prime city centre asset, located at the corner of Fountain Street and Wellington Place. A local NI-based investor acquired the building for £8.0M demonstrating clear appetite for reversionary office/retail investment product in the city.  
The sale is the largest of its type post-Brexit and reinforces the continuing demand for opportunities of this kind following hot on the heels of similar notable deals such as Oxford & Gloucester House, Longbridge House and 6-8 Donegall Square North which we sold in early 2016.

While Project Fear hasn’t yet manifested itself in the way the Remain camp predicted, there is tremendous uncertainty regarding future economic growth and scant evidence of a cogent plan for a successful Brexit.  On a local level, the autumn will see a busy period as buyers and sellers jockey within the market to test appetites on both sides of the fence. For those with the nerve and the nous, opportunities will emerge.

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