On Thursday June 23rd, the United Kingdom made the decision to leave the European Union by a majority vote of 52% to 48%. In the aftermath the British pound fell dramatically causing a ripple within the financial sector.
It led to the announcement that Standard Life, Aviva and M&G Investments have suspended dealings temporarily within their U.K property funds in order to protect investor interests that have been negatively affected by recent developments.
But what does this mean for Commercial Real Estate in the near future?
With the devaluation of the British Pound, investors have taken a cautious approach in their dealings within Britain’s real estate markets.
First-quarter results indicate the commercial real estate market saw a 50% decrease in foreign investments, causing many funds to dig into their liquidity buffer to compensate for reduced investments and increased redemption.
For investment groups with low liquidity, this can be detrimental to their portfolios if redemption outstrip their liquidity buffer as it would cause them to dispose of assets under market value in their efforts to raise funds.
Additionally, with foreign banks such as Singapore’s United Overseas Bank temporarily halting mortgage loans to the U.K., commercial real estate prices will suffer in the immediate future.
However, it is not all doom and gloom when it comes to the future of U.K.’s commercial property sector.
Due to the increased volatility, many opportunities will open up in the future for domestic and foreign investors alike as the market seeks a new equilibrium.
Follow our blog for updates and additional information on how this decision affects both the U.K. and the European market.
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Ascendix’s Wes Snow will be traveling to the U.K. next week to work with clients and meet with CRE leaders in that space. Contact us to set up a meeting.