Commercial Property:

Writing for Property Week Richard Gwilliam of M&G Real Estate says that the inconclusive election result plunges the UK into renewed short-term political uncertainty, but the economic fundamentals and UK commercial real-estate in particular remain strong.

Theresa May seems certain to form a minority Tory government, with the informal backing of the DUP. Although the longer–term sustainability of this arrangement is in doubt, whatever happens the government has reduced its ability to determine policy. It is possible that the UK is forced into a softer Brexit than Mrs May has been suggesting, says Gwilliam.

While volatility will remain due to uncertainty over the Brexit negotiations, “…we believe that UK commercial real estate is on a fairly steady footing. With the economy continuing to grow, investors should be comforted by real estate’s rental fundamentals, which benefit from ongoing (albeit softer) occupational demand and, for most markets, a lack of significant supply of space.”

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UK property offers attractive yields, says Mr Gwilliam, “…compared to both other asset classes and to other property markets globally. The renewed cheapness of sterling also boosts the UK’s attractiveness to foreign investors. The election result does not change our belief that there will continue to be investor demand for core real estate in the UK, and that the weaker pricing for riskier secondary assets should provide interesting opportunities for some investors.”

Gwilliam thinks that the fall in support for the SNP will mean that there is now less likelihood of a second Scottish Independence referendum, removing this uncertainty to the benefit of commercial real estate assets north of the border.

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