While British Prime Minister Theresa May continues to beat the drum over the potential positives of Brexit, recently calling it "a bright new chapter" for Britain, some of the branches of the country's commercial real estate sector seem to be taking a wait-and-see approach.
According to the 2018 forecast by commercial real estate brokerage Avison Young, the uncertainty's effect on the office sector in London – the principal investment market in the city – can be viewed in both positive and negative ways.
Those bullish on a thriving post-Brexit future will point to Deutsche Bank AG's decision to commit to more than 469,000 square feet of office space at Landsec's 21 Moorfields development being built by Liverpool Street station. In addition, the third quarter of 2017 showed the highest level of leasing activity since 2006.
Those predicting an economic downturn will point to the number of sub-20,000-square-foot deals (which represent 90 to 95 per cent of all transactions) in 2017, which were about 80 per cent of the 2015 levels. In addition, Avison Young is predicting an increase in office vacancy rates, from 6.1 per cent to just shy of 8 per cent, over the course of 2018.
Investment in this market has been strong, though, with £16.76-billion ($29.7-billion) invested in 192 deals in the 12 months that ended with 2017's third quarter. While those figures may have been skewed by the £1.28-billion sale of 20 Fenchurch Street, the totals still comfortably exceeded the £14.84 billion and 271 total transactions made in the prior 12-month period.