Well 2016 was a funny old year wasn’t it? There’s the obvious headline grabbers of the Brexit referendum result, as well as the election of Donald Trump as the next US President. The effect of the referendum was felt within the UK real estate investment market, with a pause on transactional activity in the lead up to and following the referendum vote and the election of Mr Trump saw a dip in both the FTSE 100 and the US dollar. But what’s in store for 2017?
Following the referendum result in June, the property industry has recognised that life goes on. Whilst we are yet to see the detail of the UK’s exit from the EU, the full impact is unlikely to be known until negotiations have been concluded. Whilst that will have a dampening effect, and we have seen that trading volumes were down at the end of 2016 compared to 12 months earlier, the consensus at the moment seems to be that levels are commendable notwithstanding the uncertainty.
The resulting devaluation in sterling also meant that the UK was still seen as a safe haven and that overseas investors’ appetite remained healthy. It is unclear whether that will continue into and through 2017, although we expect to see London continue to attract Asian and North American investors.
Within the London office market, the uncertainty as to whether businesses will relocate within the EU is having some effect on the rental market, although commentators are divided on the extent. Some are predicting a pause in rental growth or even a fall, with increased rent frees to maintain headline rents. However, others remain confident that demand remains, with deals such as Wells Fargo’s £300 million acquisition of 33 Central cited as an illustration of that confidence.
The regions have benefitted from some of the uncertainty, with northshoring from London seen as providing some defence to the Brexit effect on the capital. Our offices in Birmingham, Leeds and Manchester have seen some key transactions within their respective cities. With devolution a hot topic for 2017, we will see regions such as Greater Manchester want to incentivise new occupiers and promote their region as the “place to be” and so regional investment may prosper as an alternative to London’s safe haven status.
Finally, with the government’s housing white paper delayed until January (and expect to read about that in our blogs), we can expect to see interest in housing continue in 2017. Having seen a number of institutions invest into the Build to Rent (PRS) sector in 2016, that trend is likely to continue into 2017 once we have a clearer view on the government’s plans for tackling the housing crisis.
So what can we expect in 2017’s investment market? Most likely we will see slower growth in 2017 but the UK will still be regarded as a safe investment despite Brexit and political uncertainty in mainland Europe. Devolution plans are likely to see development opportunities materialise within the regions and for those regions to promote themselves as suitable alternatives to the City.
Based on the last 12 months, it’s probably fair to say that 2017 is going to be interesting!