COMMERCIAL PROPERTY UPDATE

Following the Brexit vote, even though over a third of commercial property deals were either abandoned or renegotiated, some investors – particularly those from Asia and the Middle East – have identified a buying opportunity.

The near 10% devaluation of Sterling following the vote has spurred foreign investors into the market. One example being a consortium of Saudi Arabian and UK investors bidding $1.3 billion for the prestigious ‘Grosvenor House’ hotel in London.

Meanwhile, the Abu Dhabi Financial Group, already holding a portfolio of £2 billion in London, has said it is looking for further sites.

Will Fulton, Chief Executive of FTSE 250 company UK Commercial Property Trust, which owns commercial property across the UK, was reported to have commented that although the vote to leave the EU had destabilised the market, an increase in foreign buyers seeking UK property was evident.

He remains confident that the occupational market for commercial property is strong, of 16 leasing transactions the company had in the pipeline prior to June 23, 14 were still proceeding.

Record high but Brexit spoils the party

Commercial property has achieved a record high, although Brexit uncertainty has muddied the waters, according to the Investment Property Forum (IPF). They report that the sector has risen by nearly 50% since its nadir, seen following the recession in 2009, with a valuation of £871 billion, an increase of around 11%. The amount of stock in the sector actually fell in 2015, so any increase in overall value came from price increases achieved.

The former highest valuation that the IPF put on the market was £865 billion, ten years ago in 2006.

Stamp duty on commercial property – gauging the potential impact

The recently released Q2 2016 UK Commercial Property Market Survey from the Royal Institution of Chartered Surveyors questioned respondents on their views regarding the potential impact of the changes made to stamp duty in the March 2016 budget, when a new marginal system was introduced.

Across the UK, 57% of respondents felt the change is likely to have little impact on transaction volumes and 24% believe it could lead to a reduction in volumes. Only a small number anticipate a resulting boost in transactions (4% of respondents), with 15% of respondents unsure.

In London, 43% of respondents felt the new regime would result in a reduction in transactions, with 42% believing the impact will be minimal.

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