Real estate investors’ opinions against the UK leaving the European Union are hardening, according to a new CBRE survey.
The poll of nearly 200 CBRE property investor clients last week reported that 73 percent of respondents think the UK would be a worse place to invest without EU membership. The number of investors with a neutral outlook is down to 21 percent, compared with 33 percent in 2014, according to the survey, which was released Thursday.
Prime Minister David Cameron set a referendum on whether or not the UK should remain in the EU for June 23. This week, London’s Mayor Boris Johnson declared his support for a Brexit, adding to the uncertainty ahead of the vote. If the Brexit occurs, most investors think the UK property market would suffer an adverse demand shock, particularly in London office real estate, according to the CBRE report. Already, real estate investors are responding to the debate with inaction, and similar to behavior ahead of Scotland’s 2014 independence referendum, investors and occupiers will likely delay real estate decisions until after the vote, the firm said.
However, Miles Gibson, CBRE’s head of UK research, told PERE the uncertainty might not be all bad news for private equity real estate.
“If private equity can be characterized as more opportunistic than, say, institutional capital, then PE houses might actually see an opportunity here to scoop up some bargains in a slightly thinner bidding environment, provided they have considered the risks carefully,” he said.
If voters decide the UK should retain its EU membership, CBRE forecasts a catch-up in transactions in the second half of 2016.
Estimates of the impact of Brexit vary widely. Some bearish real estate investors predict a precipitous decline in office and multifamily occupancies coupled with a drop in foreign capital, while a minority of economists forecast positive GDP and job growth, leading to increased demand for real estate. Even this week’s drop in the British Pound, largely attributed to Brexit fears, has multiple possibilities. Investors may withdraw capital from real estate assets to avoid losing more money, or overseas investors may accelerate UK investment to take advantage of increasingly attractive foreign exchange rates.
Whatever the outcome, one UK-based private equity real estate recruiter recommends taking the public debate more seriously. One client of the firm is assessing Brexit’s impact on continental Europe hires. Even firms not seeking to hire, she said, must have contingency plans for investments and funds if the UK does indeed vote for an EU exit.