The Post Brexit implications for the Serviced Office Sector

With property funds being closed almost daily, the reaction to Brexit in the UK property sector has been making headlines almost every day.

With investors keen to remove their funds from exposure to weakening confidence in parts of the economy like property and the financial sector, the feeling has been one of an impending recession.

The serviced office sector has been quite resilient to the ups and downs in the economy having weathered the downturn on 2008 remarkably well. The move then to look for short term property solutions to reduce long term risk meant that serviced office operators saw the longest period of sustained growth in its fifty plus year history.

The flexible workspace market has seen a number of mergers recently with new acquisitions taking place almost every month. When combined with the expansion of many providers like Citibase and Club Workspace it’s clear the sector is ploughing on regardless of the current economic climate. In a recent interview with Landmark CEO Richard Gill, Green Kinnear co-founder, Douglas Green says the recent consolidation in the sector looks set to continue in the short term and he goes on to talk about the expansion plans of a number of leading providers.

It may be still too early to say what will happen over the next six months, despite some analysts from UBS saying London property prices could fall by as much as 20% this year. This has been revised up from their previous estimate of 15% but it should also be noted that even at the very highest UBS estimate, this expected decline is a far cry from the 44% drop between 2007 and 2009.

These days the market is different from those unpredictable days of the so-called downturn. The banks exposure to commercial property debt is down from its £150bn peak in 2009, to around £85bn today.

With house prices stalling in the three months before the referendum, many experts have predicted a fall in prices in the months ahead, especially in London and Scotland. Markit chief economist Chris Williamson said, “This is the first time that prices have failed to rise in London since late 2012 in the quarter before the vote.” However, in July things are looking up. According to Knight Frank the negative outlook has failed to materialise, with London house sales up 38%, fueled by an influx of foreign investors attracted by the low pound.

This see-saw effect makes it very difficult to predict which way the property sector will go next, but all eyes are on the top property funds in the weeks ahead to see if current losses deepen or improve. With the appointment of Theresa May as the UK’s new Prime Minister this week, bureaucrats in Europe and the world financial markets are watching closely to see how she deals with the UK’s exit from the European Union.

Watch Theresa May’s full speech as Prime Minister below:

Video courtesy of ITV News

So watch this space to see what happens next. We will post updates as the situation develops.


About the Author

Stephen Moore is a writer and marketing consultant supporting businesses in the commercial property sector. Find out more about Stephen at Google+.

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