The latest RICS and Macdonald & Company Rewards and Attitudes Survey shed a lot of light on what real people think about the prospects in the property & real estate sectors after Brexit (if it happens). The survey found that Brexit is casting a dark shadow on how property professionals feel about the future for the property industry. Here we look at if the pessimism might be misplaced. Click to order your free salary survey.
What the Survey Tells Us
When it comes to Brexit, property professionals are, on the whole, unfazed. However, of those who believe Brexit will have an impact on the property industry, the survey found that:
- More than a third think Brexit will have a negative or very negative impact on them personally, while only 8% believe it will be positive personally.
- 39% feel Brexit will have a negative effect on their companies, and only 9% feel that it will be positive for companies.
When asked about their sector, almost half of professionals feel that Brexit will be negative or worse. Again, only 9% feel that Brexit will be positive for the sector in which they work.
Are Property Professionals Right to be Pessimistic?
The regions are performing well in office markets.The take-up of office space in London has been behind trend since the EU referendum. There is a feeling that the slowing market is because of a ‘wait-and-see’ attitude, with companies hesitant to commit before the outlook for Brexit is clearer. However, there have been signs that the office market is ready to rebound.
Demand recovered in 2017 from the reaction to the shock Brexit result in 2016. North American and European occupiers have been particularly active. Contrary to pre-referendum forecasts of upwards of 100,000 job losses in the City, which had already been pared back to 10,000 in September 2017, financial firms have relocated fewer than 2,000 jobs to EU financial centres from London.
In the regions, the story is very different. Regional cities such as Birmingham & the Midlands
, Leeds, Manchester
and Liverpool have maintained ‘business as usual’. However, far from continuing as usual, business has been booming. In the top six CBNDs, take-up office space has remained consistently higher than the 10-year average. Lower costs, massive regeneration and a highly qualified population are encouraging companies to ‘north shore’ back office functions, creating new jobs
and providing an economic impetus that was once reserved for the capital.
Industrial Property in Demand
Take-up of industrial space remained strong in the aftermath of the EU referendum, and it has continued to hover around 100 million square feet per year since. Rental price growth averaged almost 5% through 2016 and 2017, almost three times the rate of the previous 15 years. However, it should be noted that this performance has been encouraged particularly by the expansion of Amazon, as well as a burgeoning tech sector and structural changes in the economy – especially in the retail environment.
Retail Property – a Cloud Ready to Burst?
Look around most high streets and you will see evidence of decline. There are plenty of empty retail units. Retailers have been hit hard over the last couple of years. Undoubtedly, consumer confidence has been hit. Negative real wage growth damaged people’s ability, though real wage growth is now positive. Local authority rents and rates have risen and taken their toll, too. However, perhaps one of the biggest factors for the changing high street is internet shopping: companies like Amazon may have been taking up industrial, warehouse and distribution space because consumers are spending more online than ever before, to the detriment of the high street.
In short, Brexit may not have helped the high street and retail property market, but there are bigger factors at play. The latest forecast is that 23,000 shops will close in the UK in 2019, following on from 20,000 store closures in 2018.
Residential Property – Demand Outstrips Supply
While residential property price rises have been sluggish, the story is again one of regional variations. London prices have increased most slowly, and in prime central London prices have fallen back from their peaks. Meanwhile, in regional cities prices have been rising at above trend rates. This change in fortunes is expected to continue for some time, with affordability issues still more impactful in the capital.
While housebuilders and developers are reacting positively to government demands for more new homes to be built to meet its target of 300,000 per year by the mid-2020s, the current completions of around 185,000 per year are still short of demand. Brexit may have dampened this demand as homebuyers await more certainty in the market, but it is possible that once Brexit Day has passed the pent up demand could be released.
Property Professionals Become More Optimistic Without Brexit
As well as asking about their thoughts concerning Brexit, the survey also quizzed professionals about their views of the outlook for their companies, without a hint of the ‘B-word’. Remarkably, property professionals were in much more buoyant mood when answering the question, “Compared to 2018, how will 2019 affect the following areas of your business?”. Here is what property professionals said they expect:
- 40% expect increases in business opportunities vs. 16% who expect a decrease
- 33% expect increases in investment in technology vs. 16% who expect a decrease
- 25% expect an increase in investment in staff training and development vs. 18% who expect a decrease
In addition, property professionals expect that companies will increase hiring of new permanent staff (34% vs. 22% who expect a decrease in hiring), and that hiring of new temporary staff is likely to decrease (34% vs. 15% who expect hiring of temporary staff to gather pace).
Should Brexit be Your Main Concern?
In a word, "No". When Brexit is stripped away from the conversation, the property industry across most sectors appears to be in good shape. As demand on high streets evolves, there is likely to be opportunities for new development – particularly of residential and mixed-use property.
While there may be a bumpy ride ahead in the short term, the economic and business certainty that even a ‘hard Brexit’ will provide may be more positive for the property industry than many expect in the medium and longer terms. With strong underlying economic fundamentals, it could be that companies need to focus on strategies to hire and retain talented staff rather than worry overly about Brexit.
At Macdonald & Company, we help companies and property professionals come together – the perfect match for both parties. If you are seeking to hire talent or you are a property professional looking for a new job in real estate
, don’t hesitate to connect with our teams