CoStar Insights

CRE Investment in the UK Falls in 2Q 2016, but Opportunities Remain

by Mark Stansfield | Aug 31, 2016

Commercial property investment in the United Kingdom fell to a three-year low in the second quarter of 2016 as investors geared up for the European Union (EU) Referendum which took place in June, reports CoStar Group in its latest investment review.

Brexit Chart

British investment volumes in the first half of 2016 dropped 30% compared to the same period a year ago, with the second quarter taking the hardest hit.  London received just 43% of all CRE investment, its lowest share since the first quarter of 2010.  A conflagration of high pricing, Brexit uncertainty, and buoyant construction activity led investors to hit the “pause” button during this time.

Falling volumes in London contributed to a sharp slowdown for office sales in general in Q2 2016. Retail investment rose following a record-low first quarter, led by retail warehouse investment.  Supermarket and shopping center volumes were still relatively weak.

Notably, in CoStar News’ Brexit Sentiment Survey sent to CoStar UK’s 30,000 readers, nearly 50% of respondents agreed the sector most likely able to withstand future Brexit headwinds is logistics, with the shift from physical to online retailing expected to continue regardless of wider economic conditions.

The UK’s decision to leave the EU has created some short- to medium-term volatility. But underlying fundamentals in many markets remain strong. As true with most downturns, there will be viable opportunities for investors with capital, local knowledge and access to good data.


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