More than three-quarters of property investors expect UK real estate investment and values to fall due to Brexit, according to the latest PwC and Urban Land Institute’s Emerging Trends in Real Estate Europe report.
The survey of more than 800 property executives also showed that 76% of respondents expect more businesses to relocate from the UK to Europe – although only 8% expected the number of relocations to increase substantially because of Brexit.
Elsewhere in the survey, London was ranked as the third-lowest city for investment and development prospects in 2019 despite being the most active European market between Q4 2017 and Q3 2018.
The survey raised concerns over a “late-cycle” edge as the industry moves “one year further into the cycle and one year closer to the end”.
Just 28% of respondents expected equity available for refinancing or new investment to increase, compared to 50% last year.
Lisette van Doorn, chief executive of ULI Europe, said: “Investors are becoming more cautious and investment and development preferences are more and more driven by real estate fundamentals, such as the economic growth prospects and health of the local occupier markets.
“Sentiment is more negative on cities and countries facing higher (geo) political risks, which creates uncertainty that investors don’t like.
“Brexit is a clear example in this respect, where a number of respondents feel the UK will lose some of its competitive advantage, which impacts investment and development prospects.”
Respondents also ranked their preferred sectors, which were dominated by alternatives. Co-living, logistics and retirement/assisted living were ranked as the most attractive.
Nearly 60% of respondents were actively investing in alternatives and two-thirds wanted to increase their alternatives holdings. In 2015, it was as low as 28%.
Gareth Lewis, head of real estate research at PwC UK, said: “Investors are seeking greater exposure to sectors that are supported by strong, more predictable demographic and infrastructure drivers, such as residential related sectors – and this requires them to focus more on the operational management of the assets.”
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