Brexit: occupier markets

Perhaps more than any other variable, the impact of of Brexit on the leasing market has been the subject of most myth-making. Today, we assess the evidence to date.

3. Occupier Markets

Stronger than expected economic performance of the UK since the referendum has fed through to robust leasing activity. Further, the number of companies which have relocated people and activities outside the UK since the referendum on fears related to the UK’s future trading relationship with the EU has been limited to date.

“The actual count is relatively small in terms of firms and the number of jobs is in the hundreds, not the thousands,” according to Elisabeth Troni, head of EMEA research and insight at Cushman & Wakefield.

To the extent that corporates have decided to relocate, research by KPMG shows that no clear winner has emerged as an alternative to the UK and for the most part London. Luxembourg, Dublin, the Netherlands, Germany and France have each picked up a share of a small pool. Troni said if she was pushed to pick a likely winner from the above, she would suggest Paris, as many of the global firms likely to contemplate moving still often have operations in the French capital which provides some logistical efficiency.

Since the referendum, growth rate in UK office employment has moderated while take-up of UK office space has increased, according to Cushman & Wakefield. However, the expectation for UK office take-up over the coming two years is for take-up rates to decline, synching with the UK office employment rate. “There will reconverge over the next couple of years,” Troni said.

Rental outlook for the City of London – assuming a no deal Brexit is averted – is for a much softer decline in growth rates. Prime rents have held up much better than expected, currently trading at between £65-68 psft, with smaller deals often above £70 psft, says Troni. While the rental decline many anticipated following the referendum has been not emerged, the outlook for lower employment growth suggests softening in City rents over the next couple of years.