The UK voted to leave the European Union (EU) almost six years ago. After years of negotiation and under the leadership of no less than three prime ministers, the UK left the EU on 31st January 2020, entering a transition period only officially ended just before the close of that very same year. Needless to say it has been a long and arduous process to depart, and the timeline has had a ripple effect on the UK and the industry sectors it’s home to.
According to many industry experts and commercial property estate agents like ourselves, the commercial property market in particular has been significantly impacted by Brexit. In fact, in many instances, the UK commercial property market is still feeling the effects today.
Whilst the commercial real estate and property management sector’s legal framework has been largely insulated thanks to its foundation in domestic law rather than European law, the shift from the single market and customs union has no doubt changed the way things are done amongst buyers, sellers, investors, developers and commercial property estate agents. Here we explain how…
The uncertainty of Brexit
Whilst territories such as Greenland, Saint Barthélemy, and French Algeria have left the EU in previous years, they by no means offered a blueprint for leaving a united Europe. As the only sovereign country to have left the EU, our departure after 47 years of membership meant a lot of unanswered questions. This caused widespread uncertainty across many industry sectors, including the commercial property and property management markets.
The transition period however did a lot to remedy the fears of how the UK and EU would work together going forward. With this, dwindling market confidence was temporarily restored. Unfortunately, as market confidence rose amongst buyers, sellers, investors and the commercial property estate agents that represent them, the effects of the Covid-19 pandemic began to take their toll, sparking fresh concerns for the commercial property sector.
A mass exodus for business
Along with Brexit uncertainty came fears that businesses that have relocated to the UK would return home post-Brexit.Â
A mass exodus of businesses, especially those serving the financial market, was predicted, a move that would trigger a major transition in occupational trends. These concerns meant many investors were looking to make changes to their real estate portfolios to ensure better security following an official departure from the European Union.Â
For those looking to add to their commercial property portfolios, issues surrounding pricing became apparent in the wake of the EU referendum but thankfully this didn’t last.Â
Our commercial property estate agents and other industry experts expect no further impact on pricing as a result of the far reaching effects of Brexit. Instead Brexit and its effects are now being priced into the sector after a period of adjustment following the referendum.
A fall in new lending
The financial instability of the UK economy was of course a major cause for concern, and was likely to have consequences for both our professional and personal lives. For commercial property owners and investors wishing to ensure stability during this rather unstable period post-referendum, funding options were particularly thin on the ground.
Lenders weren’t as generous with their funding and refinancing options as they used to be. Whilst they were (mostly) willing to support and assist existing customers as they negotiated new uncertainty as Brexit became a reality, there was a sharp decline in new lending.Â
The new lending woes continued as the Covid-19 pandemic took hold. As Covid rules in the UK are scrapped and international travel restrictions are expected to the removed in the days and weeks ahead, the recovery of the financial sector following Brexit and the pandemic is set to be cemented. This can only be good news for the buyers, sellers and investors our commercial property estate agents and property management specialists represent.
The disruption of supply chains
Another Brexit concern for organisations serving all sectors was the supply chain disruptions that could stop business progress in its tracks. Many companies relied on suppliers in the EU to operate. Our departure from the European Union had the potential to cut off access to these global supply chains, meaning every business had to prepare for the worst.Â
The construction sector in particular was expected to be detrimentally impacted by the disruption of supply chains, and alongside the impact of Covid-19, this disruption is still being felt today. Many developers and construction companies continue to report high material prices, costs that they have had to pass onto their own clients.
In addition to materials, access to labour has also been affected. A large proportion of the construction professionals operating within the UK originate from the EU, and many UK based developers and construction companies rely on skilled migrant labour to deliver projects successfully.
As we continue to recover from Covid-19 and adjust to Brexit procedures, the realities of gaining access to the EU’s pool of skilled migrant labour are still being deciphered. It is however predicted to be hindered by lengthy work visa processes particularly following the end of the free movement rules which EU membership afforded us as a nation.Â
A final word from us
Due to the unfortunate timing of the Covid-19 pandemic and the continued market adjustment the buyers, sellers and investors our commercial property estate agents and property management specialists serve, the full impact of Brexit on commercial property is still yet to be fully realised. Things are however looking brighter as Covid-19 restrictions ease and the overall health of the market is established.Â
For further advice and support with your commercial property portfolio, please contact our commercial property estate agents and property management team.
