Brexit unlikely to dent London as focus for property investment in Europe

London will remain an attractive location for commercial property investment in Europe despite Brexit although some banks and financial organisations may move out of the city, new research suggests.

They could look to take space in other European cities such as Frankfurt and Berlin as a result of the decision by the UK to leave the European Union but the outlook report from real estate services firm JLL suggests that the numbers will be small.

JLL predicts that 2017 will see no real clarity on the eventual Brexit deal and that the UK economy will grow less strongly than in recent years but will still outperform most other developed nations.

It also forecasts that there will be an increase in investment volumes from last year and the continued momentum of the alternative investment market will not be diminished, particularly the retirement living sector.

‘Post Brexit London will still be seen as an attractive location due to availability of skills, flexibility of labour laws and the advantages of language. Government figures suggesting that up to 90,000 jobs may leave the UK is scaremongering,’ said Shelley Frost, head of consulting at JLL.

‘We will see increased demand from fintech and take up in the tech sector will remain robust as the growing fintech cluster that we are seeing in regional locations such as Manchester highlights,’ she added.

According to Rob Wilkinson, chief executive of AEW Europe there is a long way to go before cities in France and Germany could compete with London. ‘From an investor perspective we didn’t see a great fire sale of London property post referendum and this year we should see an increase in investment volumes,’ he said.

Jon Neale, head of research at JLL UK believes that the spotlight for this year will be on the big six regional cities due to public realm improvements and far more students choosing to stay in cities such as Birmingham and Manchester after graduation. ‘There is still a huge divide in skills and productivity between the North and South in the UK and this needs to be addressed through policy. The danger is that the Government’s agenda may become too full with the Brexit negotiations to address these,’ he explained.

Ollie Saunders, lead director of alternative investment at JLL, predicts that 2017 will see alternatives outperform the rest of the market with healthy income returns and an anticipation of yield compression.

‘Alternatives made up more than 25% of all commercial transactions in 2016, up from 10% in 2010. They are a meaningful and maturing part of the UK property market,’ he said.

Experts believe that Government commitment to infrastructure investment and unlocking regional growth l following the announcement of extra spending on infrastructure and research and development will help the property industry.

However, Rain Newton Smith, chief economist at the Confederation of British Industry, believes that more can be done by business and Government. ‘There will be opportunities for growth in the North and the Midlands but infrastructure spending and improving productivity will really unlock growth. It’s also vital that there is investment in digital and well as physical infrastructure,’ he pointed out.