Perspective

Private Assets

Beyond Brexit UK Real Estate Outlook for US Investors

The vote to leave the EU in June 2016 has shaken UK politics and dominated the short-term outlook for the economy and commercial real estate ever since. The election of Boris Johnson’s government with a big majority on December 12th means that the UK will almost certainly leave the EU at the end of January 2020.

The focus will then switch to the UK’s future relationship with the EU and other countries and, in particular, trade deals; but worth noting, there will be a transition period in the interim to minimize disruption. The UK government faces a choice between on the one hand, tearing up EU regulations which will give it more latitude in trade negotiations with the US and other countries and on the other hand, maintaining easy access to the EU single market. While there is a wide range of opinions, the consensus is that Brexit will result in slower UK economic growth, because the boost from greater trade with non-EU countries will be more than cancelled out by weaker trade with the EU.

To date the main impact of Brexit on UK commercial real estate has been on liquidity. Although the investment market remains active, at least for office and logistics assets, both domestic and foreign investors have turned more hesitant since the start of 2019. The total value of investment transactions fell by 25% between the first nine months of this year and the corresponding period of 2018 (Source: Property Data).

The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.