Over the past three years, there have been significant developments in the UK’s commercial property market. Brexit has shocked the system by depressing valuations, severely slowing rental growth, and throwing a shadow over the commercial property for sale Kent or demand for British estate in the future. Still, longer-term market dynamics are also altering the sector.
It is uncertain whether this will be the situation when the UK formally exits the EU, especially if there is no trade deal. Still, the outcome of the EU referendum and the subsequent decline in the pound’s value has increased demand for British exports and industrial property. In contrast, the new office supply has remained stable. While high streets and retail centres continue to empty due to the rise of online shopping, structural modifications have also had an impact.
How to Invest in the Commercial Estate Market in the UK
By purchasing or trading on the shares of commercial estate investment trusts (REITs) or market-tracking exchange-traded funds (ETFs), you can expose yourself to the retail estate industry.
As an option, you can use derivative instruments like spread bets or CFDs to experiment on the future course of the commercial estate market without owning the underlying shares. Open a real account with many platforms if you’re prepared to begin trading REITs and ETFs. Use a demo account to practise trading in a risk-free setting if you wish to acquire confidence while making market predictions
What Has Happened to UK CommercialEstate Since the Brexit Vote?
The referendum results since June 2016 have been inconsistent, but when the whole picture is considered, it is evident that the Leave vote harmed UK commercial estate. Although valuations have mostly stayed steady and construction has begun to drop, there are still concerns that a Brexit-fueled crash is just around the corner. Rent growth has also drastically slowed.
Prevailing Patterns in the UK Commercial Estate Market
Both long-term trends still developing and brand-new, emergent trends that have just begun to emerge are included.
These consist of the following:
1. Reworking retail space
More businesses are beginning to transform this unused space for new uses, especially for housing, as they know that high street shops and shopping centres will never be the same again.
2. Retail stores to retail warehousing
Due to increased internet sales, high street stores are continuing to close. As a result, some stores have been forced to complete, but additional warehouses are opening as online vendors broaden their logistics and delivery systems.
3. Depreciation benefits
The pound’s depreciation benefits industrial sectors by increasing demand for industrial space and boosting demand for British exports.
4. Condensed leases and shared offices
Many businesses have developed novel ideas in response to the increasing move to more flexible, shorter-term office leases.
5. Alternative commercial estate gaining popularity
Student housing and self-storage continue to have solid fundamentals and the most room for expansion.
6. The most significant threat comes from Brexit and rising interest rates
The UK commercial property industry faces two immediate challenges from Brexit-related uncertainty and the potential for higher interest rates in the years to come. However, structural changes affecting the retail sector will continue.
British Land Vs Landsec
The two main options for investors wishing to invest in commercial estate in the UK have historically been Landsec and British Land. Still, both have struggled this year due to their overreliance on retail and a shortage of industrial estate in their portfolios.
British Land paid the cost for having up to 50% of its property made up of retail properties by shifting to a £42 million pre-tax loss in the first half of 2018, while Landsec had to write down the worth of its commercial properties this year, such as the Bluewater shopping centre in Kent.
This has driven both businesses to announce new plans to move away from the faltering retail sector, intensify their respective office expansions, and—most significantly—advance into home construction by transforming former retail locations into residences.
Take Away
This article paints a clear picture of what’s ongoing in the commercial property market in the United Kingdom.