Brexit fears fail to slow international commercial investment in South West

International businesses are postponing investment in Britain in the wake of EU uncertainty a new paper by the Royal Institution of Chartered Surveyors (RICS) has revealed.

The RICS EU Referendum Paper which examines the pros and cons of the UK remaining and exiting Europe includes new survey data showing that there has been a steady easing in international demand for UK office, industrial and retail property since the referendum was confirmed in Q2 2015.

However, the demand indicator among international investors for South West commercial property shows 17 per cent more members surveyed reported a rise in interest from overseas investors rather than a fall over the last three months. This is the firmest increase in international enquiries in the region since RICS records began in 2014.

Uncertainty caused by the EU referendum has been cited by 38 per cent of RICS members working within the sector as the reason why major international retailers and other businesses have been nervous of investing in Britain.

Should Britain leave the EU, 29 per cent of respondents in the South West felt that it would have a negative impact on the commercial property sector and only eight per cent said a Brexit scenario would have a positive impact on the commercial property sector.

Meanwhile figures from the RICS UK Commercial Property Market Survey, Q1 2016, revealed that 35 per cent of survey respondents in the South West expected rents to rise rather than fall over the next three months compared with 44 per cent expecting rises in Q2 2015.

Across all commercial sectors in the South West 40 per cent of respondents expected capital value to increase rather than decrease over the next three months – down from 43 per cent expecting increases in Q2 2015.

However, across the South of England the longer term expectations are more positive with 71 per cent more surveyors expecting commercial rents to rise rather than fall in the next 12 months and 70 per cent more expecting capital value to increase rather than decrease over the next 12 months.

In the South West 92 per cent of respondents viewed commercial real estate to be fair value and none thought it was overpriced. Buyer enquiries in the South West continue to rise with 52 per cent of surveyors reporting an increase in investment enquiries than a decrease.

The EU Referendum Paper also shows that a range of key industries from residential housing to construction and rural have been hit by short term uncertainty. Again in the longer term steady growth is still predicted across rural, land and built environment sectors.

RICS Chief Economist, Simon Rubinsohn said, “There is no doubt that since the EU referendum became a certainty following the General Election last May we have seen a decline in interest from overseas investors in UK commercial property. At least in the short-term we know that international retailers and service providers are finding the UK market less attractive.

“But we need not view this as a negative.  As a result of the market dampening business rents are also rising at much slower rates which suggests that we might soon be seeing more favourable conditions for entry and business growth.

“Moreover, it is interesting to see that despite the climate of uncertainty across all sectors surrounding the impact of Brexit, the long-term view is that we will continue to see the value of land and property assets increase, albeit at a marginally slower rate.”