On June 21st 2016 the commercial property market crashed, or so we read in the newspapers!

Today and 6 weeks on, and with the benefit of hindsight we know that thankfully that statement is not strictly true or is partial at best. The market which had stabilised following the global financial crisis and which had been booming in London due to an earlier lack of prime office stock availability certainly got a rude shock, and for some property developers and Landlords who had complacently predicted a ‘stay’ decision, it has proved devastating. Up to the Brexit decision London had been enormously proactive in property development with over 7.5m sq ft under construction since October 2014 according to the London Office Crane survey, which is the highest since 2002!

When the UK voted for Brexit and a bit later still when our new Prime Minister, Theresa May told the world that “Brexit was Brexit” it ushered in a new point of uncertainty for the commercial property market and particularly the office sector. Clearly there is no going back. Brexit will happen and we need to understand the implication for thousands of UK businesses that are about to consider a lease break, lease surrender or renewal. What is best?


A third of commercial property deals which were in negotiation at the time of the UK referendum have collapsed or are under re-negotiation, presumably at a lower figure or at terms more beneficial to the leaser. This fall out is certainly a multi-million catastrophic outcome for landlords. However, the majority of deals are proceeding even if they are somewhat delayed. One of the main high profile deals which has been scuppered in the aftermath is the expected purchase of the 389,000 sq ft City of London building known as Cannon Place by Germany’s Union Investment for £465m, who were in advanced talks as to a purchase of the site. According to Cushman and Wakefield 64% of deals are pushing ahead, based upon them tracking over £8 billion of deals in progress at the time of the June vote.

Another outcome of a ‘leave’ vote was that some property funds were forced to suspend trading when investors rushed to make withdrawals and in particular the retail property market holding over £15 billion of funds and which was already struggling in a depressed business arena, suffered horribly losing millions overnight. Land Securities’ the London giant property developer also suffered a sharp decline in their share price and have warned of “subdued” ongoing demand from occupiers.


The London property market has been consistently outperforming the regions for a long while and is far stronger and more resilient that the North of England. We await several key decisions from the new Government as to infrastructure spending and not least a decision on the expansion for Heathrow. This Government has quickly shown every indication that they want to demonstrate that “the UK is open for business” with trade deals being discussed with North America, China and India, and continuing on with increased pace the work started by Cameron and Osbourne before their abrupt departure.

The danger for London is that it is heavily reliant on overseas investment to fund property investment and for the time being this has fallen by an estimated 41% as investors place their money elsewhere. However, London is an alluring and attractive City financially, and there is every indication that if trade deals are concluded quickly, such entrepreneurial activity will keep London at the heart of the financial world, and that long term the property market will consolidate and continue to grow again once stability is reached.


It seems from the initial data we have, that the regions have suffered more than London. The failure rate on commercial property deals outside London was 59% according to the Cushman’s data. This compares to London where 67% of property deals were proceeding. The most vulnerable deals were those involving buildings in less popular or “tertiary” locations or those with a short time remaining on the lease. If plans for the Northern power house and the main infrastructure projects proposed to link Cities in the North of England go ahead, this will give an enormous boost to areas of the UK which have lacked investment but in the meantime expect Brexit to have a negative effect for some time to come.

Already the “Crossrail” effect is being noticed in the south of London and towns such as Maidenhead, Reading and Slough are all showing positive economic improvements, with Reading being named the UK’s most successful economic City in the Good Growth for Cities report by PWC. It was also ranked a top ten, most attractive City for foreign investment in the FDI’s report entitled; European Cities and Regions for the Future. There is no doubt whatsoever that there is a bright future for property investment along the Thames Valley corridor which wends its way west out of London past Heathrow towards Bristol.


Britain is rarely better than when faced with adversity and whilst the outcome of the Referendum is not what many would have wished for, there is no doubt that the commercial and office property market will recover even if we ride through a deep ‘blip’.

Typically, the Brexit effect will tend to show up in 4-5 years’ time which is typically the timeframe for a major commercial development to take place.

The Brexit vote has surely unfurled a high degree of short term uncertainty but the dust will settle and a lot of people will return to vendors and say “we are going to try and chip your price by 10%” according to Jason Winfield, who is Head of investment at Cushman and Wakefield.

My advice to businesses is to take advantage of the uncertainty, and to negotiate hard because the market is fundamentally sound and if you miss this brief opportunity to strike a great deal on your commercial property, in the not too distant future it will be “business as usual” and you could miss out.