UK commercial real estate is still attractive for the long term, despite the country鈥檚 vote to leave the European Union, delegates heard at Expo Real in Munich today.
Speaking on a panel moderated by Richard Lowe, IPE Real Estate editor, Marcus Cieleback, head of research at Immobilien, said that while Brexit had 鈥渟ome influences鈥�, the UK 鈥渋n the long run is still attractive鈥�.
The Brexit vote, he said, 鈥渃ould offer some opportunities鈥�.
鈥淎 very long period of insecurity鈥�, which could hold back decision making, is also likely, he said.
鈥淯S investors are less concerned than Europeans,鈥� he added.
The UK鈥檚 vote to leave the EU, said Witsard Schaper, director at the Canada Pension Plan Investment Board, has not altered the investor鈥檚 long-term view of the country.
鈥淲e still see the UK market as attractive in the long term,鈥� he said. 鈥淲e look at the UK on a global basis. We are definitely looking at opportunities, but we haven鈥檛 seen the kind of pricing that is necessarily a 10-year institutional product.
鈥淚 don鈥檛 think the UK is particularly cheap right now because of what鈥檚 happened.鈥�
He said the UK was 鈥渓ikely to have had a slowdown anyway鈥� and that the vote was a catalyst, as 鈥渋t was a moment late in the cycle anyway鈥�.
Mahdi Mokrane, head of research and strategy for Europe at Investment Management, said Europe as a continent looked unstable, with a number of elections forthcoming.
Brexit, he said, was just one issue for investors to contend with.
鈥淭here are several risks today,鈥� he said. 鈥淗ighly fluctuate currencies make life incredibly difficult.鈥�
Cieleback said the UK market was 鈥渢urning before the referendum鈥�, while Mahdi said he had 鈥渘ot seen many striking deals with a huge discount鈥�.
He added: 鈥淵ields haven鈥檛 moved much.鈥�
For Jeremy Plummer, head of EMEA at Global Investors and chief executive at CBRE Global Investment Partners, the immediate correction in asset values is 鈥渜uite a wide range鈥�.
鈥淔or some assets, yields have hardened, there鈥檚 been a flight to safety, and that鈥檚 been related to location and property,鈥� he said.
Of tenant fallout from the referendum, Mokrane said: 鈥淲e only had one leasing deal fall out due to Brexit.鈥�
Office tenants, he said, are asking for more flexibility, adding: 鈥淭hey want to keep their options open.鈥�
Cieleback, who said banks would try to keep a headcount in London, does not envisage an exodus from the UK capital.
Plummer said the long-term view was that banks were 鈥渁lready thinking of moving out to less expensive locations鈥�.
Front office will most likely be kept in London, but marginal operations moved out, he said.
Plummer said short-leased London offices were most affected, with long-lease warehouses sitting at the opposite end of the risk spectrum.
鈥淭here are marked, different perceptions of property types,鈥� he said.
Mokrane said some regional markets had held up 鈥減retty well鈥�, pointing to the industrial sector and Manchester offices.
鈥淲e will look at fewer markets and stick to those,鈥� he said.
Cieleback said 鈥渙nly a handful of investors have deep enough pockets鈥� to execute deals.
For Plummer, opportunity exists in smaller lot sizes.
鈥淲e remain very active in the market, but there aren鈥檛 any bargains,鈥� he said.
