UK commercial property demand falls further due to Brexit uncertainty

Enthusiasm among international investors for the UK commercial property market has continued to wane over the past quarter, with sentiment moving towards France and Germany.

The latest commercial property investment barometer from BrickVest, which uses the views of over 6,000 international professional real estate investors, shows that only 27% view the UK as their preferred market, a 4% fall in the past 12 months.

Appetite for the UK property market among German investors fell to 14%, down from 19% year on year while in France it slipped to 10%, almost half the 19% from a year ago.

France is the biggest beneficiary of the UK’s decline with a 20% year on year increase in international investment sentiment while support for Germany rose by 7%.

Underlining increased concerns of an imminent turn in the cycle, the barometer reveals a sharp fall in the projected volume of assets under management (AUM) investors are planning to deploy into real estate over the next 12 months. Overall, investors expect to commit just 2.5% of their total AUM, a 33% fall on their planned allocation of 3.7% in the second quarter of 2018.

Increased caution is also seen in the increased appetite for lower risk strategies, which rose 4% during the second quarter to 27% while high risk sentiment fell over the same period by 3% to 22%.

‘The latest figures of our barometer reveal the continued negative effect of Brexit uncertainty on the UK commercial property market among international investors and particularly those based in France and Germany,’ said Emmanuel Lumineau, chief executive officer at BrickVest.

‘We can expect this to continue over the third quarter and the October deadline at the very least. In the meantime, France and Germany are becoming more attractive destinations for international real estate capital,’ he explained.

‘However, we’re likely to see a sharp drop in capital allocations to real estate over the next 12 months as nervousness about the end cycle conditions will see many investors taking a circumspect approach,’ he added.