Green Street Advisors

 

 

REIT.com: Brexit and the Aftermath for Property Markets

According to REIT.com:

The United Kingdom's stunning decision to leave the EU roiled the financial system, but property markets across Europe still look stable.

...

Peter Papadakos, a managing director at Green Street Advisors in London, says his firm has marked down London office values by 10 percent. He notes that once negotiations on the U.K.’s exit from the EU start to take shape, the market could begin to get more comfortable with the new landscape.

...

If the funds become forced sellers, “that pricing evidence could be worse than we all expect,” according to Papadakos. On the other hand, a mitigating factor is that most of the funds tend to own somewhat lower-quality real estate than the U.K. REITs, he adds.

One of the most tangible impacts from Brexit on U.K. commercial real estate is the anticipated disappearance of financial and professional service sector jobs in London. Green Street is projecting an outflow of 60,000 to 75,000 jobs, which could prompt a drop in rents of up to 10 percent. Many of those jobs may be added in Dublin, Frankfurt and Paris instead, according to Green Street.

...

Real estate values in continental Europe have been increasing this year against a backdrop of modest economic growth and job creation, combined with low interest rates, Papadakos notes. He points out that continental European REITs have done well, in particular, because they own better-than-average real estate.

...

Germany has seen commercial real estate perform well this year on the back of extremely low interest rates, Op ‘t Veld says. German residential companies, meanwhile, have done “spectacularly well” from the flow of economic and political migrants entering the country, Papadakos notes.

...

REITs in southern Europe, meanwhile, have underperformed the rest of continent in the wake of Brexit, Papadakos says. For example, data from Green Street shows that, on a market cap-weighted average basis, returns for southern European diversified REITs through July 15 were off 9 percent in 2016. That compares with a 14 percent gain for French diversified REITs during the same period.

...

To view the full article on REIT.com, click here.