How has Brexit impacted real estate one year on?

28 June 2017

On the anniversary of the UK's referendum to leave the EU, there is still nothing to suggest that Brexit will have a significant impact on core land law in England and Wales. EU based regulation and domestic law that impacts on the real estate sector is unlikely to materially change in the short or medium term.

The Government may consider some relaxation of environmental regulation in the interests of businesses. For example, postponement or amendment of minimum energy efficiency standards for buildings, commencing in April 2018, is talked about as a possibility - but recent detailed government guidance suggests that one will probably proceed.

In the year since the referendum, the property market has remained relatively robust - certainly more so than initially expected. However, the principal issue is uncertainty over - and the terms - of Brexit, as well as the timing and extent of the impact on the economy. Generally, the market seems to be cautiously carrying on business as usual.

The London commercial property market is bracing itself for some short term uncertainty on rental levels but there seems to be a general belief that the city will remain a global business hub regardless of the trade position post Brexit. In London, and around the country, we are seeing landlords offer increased incentives to tie tenants into re-gears or renewals where tenants would otherwise prefer shorter terms while the outlook remains uncertain. While this tenant retention strategy seems to be largely successful (albeit with an effect on rent level), we are also seeing that it is more challenging to let space to new tenants

A weak sterling and the UK's perceived status as a safe haven for capital investment has continued to attract overseas investment around the country. Since the run on property funds in the wake of the referendum, the investment market has stabilised, although it is expected that funds will remain relatively liquid until there is more certainty.

Any period of economic uncertainty affects purchasing decisions in the residential market. However a drop off in purchasing activity is likely to see a boost in the letting market which will be welcomed by residential landlords - and in particular the developers of build to rent schemes being brought forward in cities across the UK.

Finally, potential restrictions on free movement remain a concern. Immigration partly fuels housing demand but also provides construction labour for developers and public sector infrastructure projects. All those involved will be concerned about what regulation they will face when sourcing skilled workers post-Brexit.

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