Two of the largest property agencies have highlighted ongoing volatility in the UK dealmaking market due to Brexit, as they published quarterly results just days after the country was expected to leave the European Union.
Christian Ulbrich, JLL’s global chief executive, said that activity in the UK had slumped during the extended period of political and economic uncertainty.
“In an environment where the owners of buildings in the UK are unwilling to lower their price expectations, whereas the buyers have an ambition to get a premium for buying into the UK market in that political uncertainty, the transaction volumes in the UK have been down very significantly,” Ulbrich said.
He added: “Volumes in the UK are very much down because of sellers who feel very comfortable with their portfolios. The cash flow for the owners of space is still excellent, so they have no reason to sell their buildings below their price expectations.
“We believe that in the UK volumes will continue to be muted, but it is already within our plan, so there is no negative surprise for us coming.”
Ulbrich stressed that the firm had factored further Brexit upheaval into its business plan.
“The situation around Brexit and the uncertainty which we see around Brexit has been there now for the past couple of quarters.
“So in our own planning, we have beaten our revenue forecast in the UK pretty much every quarter,” he said, adding: “The election coming up in December is, again, something which doesn’t really concern us.”
JLL saw its net income drop to $128.9m (£100m) in the three months ended 30 September, down by 4% from $134.9m in Q3 2018. The company’s revenue for the quarter rose by 13% to $4.5bn from $3.9bn last year.
Meanwhile, CBRE posted a 17% drop in pre-tax profit in the third quarter. The agent’s profit fell to $321.5m, down from $386.7m in Q3 2018. Total revenue grew to $5.9bn during the three months ended September 30, up by 13% from the same period last year.
CBRE chief financial officer Leah Stearns said the figures were “reasonably OK” given the continuing uncertainty around Brexit.
CBRE president and chief executive Bob Sulentic said that bottom line growth was restrained more widely by “a light quarter of development asset sales”. He also acknowledged that Brexit had provided the business with certain opportunities, such as its £267.4m acquisition of UK developer Telford Homes.
“We were able to acquire Telford at an attractive valuation, reflecting market concerns due to Brexit,” Sulentic said.
Sulentic added that he sees Telford’s scope to take on more projects in the UK’s growing build-to-rent sector as “at least as good as we thought it was when we underwrote that acquisition” and said that the firm would offer guidance on Telford’s expected performance for 2020 early next year.
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