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News Release

London

Investor sentiment for UK property remains strong post Brexit according to JLL

The JLL UK Investor Confidence Index has been active since 2008. This edition, which included some additional questions on Brexit, covered some 67 investors with a presence in the UK


Recent research from JLL shows that the overwhelming majority of investors (73%) intend to be net purchasers of UK commercial property over the next 12 months, despite the vote to leave the European Union.

 

The JLL UK Investor Confidence index also highlights that most (58%) also intend to make no changes to their strategic weighting to the asset class, with more intending to increase (27%) rather than decrease (15%) their exposure to the sector.

 

Chris Ireland, JLL UK CEO, commented:  "These results demonstrate that, despite the considerable issues around Brexit, the appeal of commercial property as an asset class remains undimmed – hardly surprising when yields for prime property with strong tenant covenants still attract yields of at least 4-5%, depending on location. To put this into perspective, average corporate bond yields are now at 2.19% and 10-year gilts at a little over 0.6%."

 

The survey also showed that most respondents expect total returns from UK property to fall to around 5% after several years of record results. This would still be significantly better returns than for most other asset classes.

 

Ireland added: "However, the strong survey results may also be based on the market assuming that the UK is more likely than not to retain access to the single market, with only 15% of respondents arguing that a so-called 'soft brexit' was unlikely. If the departure from the EU turns out to be 'hard', with the UK losing access to the single market, around 51% expect a 'moderate decline' in capital flows into UK Property.

 

"The uncertainty resulting from the vote has forced down JLL's confidence index to the lowest level since Q3 2011. However, it should be noted that this remains considerably above the levels seen in late 2008."

 

Investors are most unanimous on which sector is most likely to be impacted in the short term, with London Offices selected by 66% of respondents as the sector likely to be hardest hit. This is due to concerns over international companies based in the capital, particularly in financial services – although if, as most expect, a softer Brexit is the end result, the impacts may be minimal.

 

Jon Neale, head of UK Research at JLL, said: "It is worth noting that 34% of respondents expect there to be more vendors than buyers which compares to a long-term average of 23%. This perhaps reflects an anticipation of opportunities resulting from forced sales.

 

"However, with our survey also showing only 18% will be net sellers, this belief may be somewhat overstated; apart from a handful of sales resulting from one-off stress on the retail funds, there is little evidence of forced activity elsewhere.

 

"It is interesting that 54% of respondents still expect to concentrate their acquisition efforts in London and the South East – and why almost a quarter (24%) of respondents are looking to recruit staff. This could be a sign that there is strong expectation from business that there will be a softer Brexit with limited impacts on the international companies based in and around the capital."