# UK commercial property and Brexit Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2017-04-04 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Brexit Impact on UK Commercial Property: Investor Insights Meta Description: Discover insights from Investment Manager Charu Lahiri on the impact of Brexit on UK commercial property. Learn about supply pressures and strategies for URL: https://financedigest.com/uk-commercial-property-and-brexithtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/young-stylish-businessmanm-1736844008459-compressed.jpg) By **CharuLahiri,** Investment Manager at Heartwood Investment Management It seems inevitable that the Article 50 trigger sparked a flurry of headlines around several high profile London-based financial institutions relocating to various European cities. While some of this might be bluster as the City vies to retain its leading role in financial services, the primary concern for investors in UK commercial property remains the extent to which occupier demand will be impacted in a post-Brexit world. [Risks to the UK market are further accentuated by additional supply](https://www.financedigest.com/iran-deal-a-wild-card-for-oil-market-strained-by-supply-risks-reuters-poll.html "Iran deal a wild card for oil market strained by supply risks – Reuters poll") pressures, a trend we had been anticipating even before the UK referendum result. New offices are due to come on to the [market in London over the next year](https://www.financedigest.com/the-next-upcoming-years-to-see-the-aesthetic-lasers-and-energy-devices-market-get-through-the-best-of-both-innovation-and-inquisition.html "The Next Upcoming Years To See The Aesthetic Lasers And Energy Devices Market Get Through The Best Of Both – Innovation And Inquisition") and this increase in supply is likely to accentuate any downward pressure on rents. While the [supply outlook](https://www.financedigest.com/oil-rises-to-7-year-high-as-turkey-outage-adds-to-tight-supply-outlook.html "Oil rises to 7-year high as Turkey outage adds to tight supply outlook") keeps us cautious on UK commercial property, we are not looking to reduce exposure any further, having already taken profits in late 2015 and early 2016. In the near term, we expect investment activity to [remain supported by resilient economic growth](https://www.financedigest.com/german-economic-growth-to-remain-muted-in-near-term-imf.html "German economic growth to remain muted in near term – IMF") and increased interest from overseas investors – factors that have helped to drive UK commercial property’s recovery since the negative shock of the UK referendum result. The sector should also find support from the following drivers: - UK commercial property continues to offer an attractive [yield relative to ten-year UK gilts and high quality corporate bonds](https://www.financedigest.com/german-bond-yields-at-new-highs-after-stronger-than-expected-pmis.html "German bond yields at new highs after stronger-than-expected PMIs") for income-seeking investors. - A weak sterling trend is likely to remain in place, given the UK economy has to finance a sizeable current account, and is likely to attract ongoing international [investor flows into this market](https://www.financedigest.com/analysis-oil-prices-turn-more-volatile-as-investors-exit-the-market.html "Analysis-Oil prices turn more volatile as investors exit the market"). Overseas [investors have been committing capital to the UK market](https://www.financedigest.com/markets-slammed-with-noise-investors-trust-tone-to-set-the-record-straight.html "Markets Slammed With Noise, Investors Trust Tone to Set the Record Straight") over the past six months, taking advantage of a devalued sterling. - The transparency and security of the UK market [continues](https://www.financedigest.com/continual-inventions-to-accelerate-the-rehabilitation-equipment-market.html "Continual Inventions To Accelerate The Rehabilitation Equipment Market") to be a strong support to this market. Notwithstanding a supportive environment in the near term, we believe that UK [commercial property](https://www.financedigest.com/rouzbeh-pirouz-on-investing-in-commercial-property-as-the-uk-emerges-from-the-pandemic.html "Rouzbeh Pirouz on Investing in commercial property as the UK emerges from the pandemic") could be vulnerable to a slowdown going into 2018. This is when new [supply comes on to the market](https://www.financedigest.com/cell-tissue-culture-supplies-market-share-to-exhibit-steady-growth-in-the-coming-decade.html "Cell Tissue Culture Supplies Market Share to Exhibit Steady Growth in the Coming Decade") and, as the Brexit negotiations are further along, we could see potentially weaker economic activity. Against this backdrop, our approach remains targeted and sector-specific. We are exposed to those areas that are less vulnerable to [Brexit headline risk](https://www.financedigest.com/brexit-the-risks-to-the-city-and-fintech-have-never-been-greater.html "BREXIT: THE RISKS TO THE CITY AND FINTECH HAVE NEVER BEEN GREATER"), such as key UK regional cities, where supply and demand conditions remain supportive, as well as industrial sites and warehouses. We are also seeking out [strategies with longer duration income profiles in alternative sectors](https://www.financedigest.com/strategies-for-coping-with-stress-and-redundancy-in-the-financial-sector-and-emerging-stronger.html "Strategies for coping with stress and redundancy in the financial sector and emerging stronger"). These strategies tend to benefit from long term, inflation-linked tenancy profiles and more attractive valuations than other prime sectors, which may be more sensitive to [capital value returns](https://www.financedigest.com/insurer-aviva-says-capital-return-and-costs-targets-on-track.html "Insurer Aviva says capital return and costs targets on track"). --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---