London may well be the city of property opportunism

tower bridge london

commercial property in London may be up for grabs

Commercial property, Brexit,  fear; we always look at world through our own narrative arch. What we know, what we experience, our background and outlook influence our views. Isn’t that why London was in deep mourning over the Brexit vote? This is in contrast to other parts of the country. They were jubilant about giving the UK government a bloody nose.

Weak sterling prompts commercial property bargain hunters

However, others from across the pond and beyond can sniff an opportunity when they see one. With sterling struggling, suddenly there are bargains to be had in London and beyond. In fact the UK has become even more attractive to foreign investors than it ever has been.

Madison International Realty from New York is gearing up to splash out. In fact more than £1bn in the sale of the century. Property funds, in the news last week for suspension in trading, may well be selling discounted properties in the next year and a half. Like ants that sniff a picnic from a mile away it really hasn’t taken long for foreign investment to take notice.

7 property funds hold in excess of £15 billion

London Office Views

What’s the future of commercial property in London?

Both Knight Frank and Cushman & Wakefield, well-known property advisers have stated that fund assets were potentially being sold. This was  to generate money for investors that have been twitchy and whose actions lead to suspension of trading. In fact there were at least seven property funds. Between then hold In excess of £15 billion, that saw investors rushing to take their money out post Brexit.

This is not a return to 2008

This might sound familiar to anyone who remembers the 2008 crisis .There is one major difference:we’re unlikely to see much distressed debt secured against commercial property.

Fancy commercial property in Soho Square or Oxford St?

So what does that mean for a foreign investor looking for a bargain within the commercial property market in London? It’s likely that any prime assets with the UK capital will be released at a discounted rate. This could be interesting because the suspended funds have an interesting set of portfolios. Not only this they are in prime locations in London, for example Oxford St, Soho Square and the South Bank.

What happens short or medium term?

London Offices

London commercial property might be fine in the short term

So what will it mean for the smaller businesses looking for commercial property in London? Sentiment may well be affected and real economic conditions may well affect the expectation on future business growth. This of course will strengthen the need for commercial property. Bearing in mind that in general terms, leases on average were around 7.2 years in 2015 (Colliers) However, prime commercial office space is 15+ years while properties such as hotels, supermarkets and warehousing/distribution can be 25 years. This will mean that the occupier market will not be impacted in the short term. But it will be interesting to see the picture in another 5 years. However, as London does experience pre-leasing that may well help to lessen the Brexit blow. Yet those considering short-term expansion or medium-term occupation might be less likely to take a risk at this time.

What are you going to do in 2016/17? Have your plans changed since Brexit?

Further Reading

Commercial property prices could fall 20% after EU vote

Great Portland warns Brexit will dampen commercial property