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Fears about Britain’s potential departure from the EU are putting off international firms from investing in UK offices and shops, and some are considering relocating in the event of a leave vote – with Paris, Frankfurt and Dublin likely to benefit.
A report from the Royal Institution of Chartered Surveyors (RICS) shows that there has been a steady easing in international demand for UK office, industrial and retail property since the referendum was confirmed last spring.
Nearly 40% of RICS members across the UK said that in the first quarter of 2016 international retailers and others were reducing investment in the UK ahead of the June referendum. In London, 80% said that uncertainty around the outcome was holding back investment.
Demand from international investors for UK offices and shops has fallen sharply, with just 5% of RICS firms reporting increased interest from overseas companies over the last three months, compared with 36% a year ago.
The organisation said some international firms were drawing up contingency plans to shift their headquarters in the event of Brexit. Overseas firms based in the UK occupy large swathes of real estate, and their departure could harm office occupancy rates, and the local economy.
Likely beneficiaries of a Brexit are Paris, Frankfurt and Dublin, although the report said London was likely to remain a magnet for investment. Investment rates have eased, but not frozen.
Housing and planning minister Brandon Lewis said: “We have a strong and growing economy but as this report shows major international businesses are postponing investment because of fears of Britain leaving the EU. On 23 June there will be a clear choice between economic security and global influence in remaining in the EU, or a leap in the dark and further uncertainty.”
The RICS report also said that house prices were likely to fall, should the UK opt for Brexit, as a significant number of higher end properties, especially in London and the south east, are bought by Europeans and people from outside the EU.
It said: “Brexit could see less demand for higher end properties as highly paid executives could follow their headquarters to mainland Europe ... We can, therefore, suggest house prices could decrease in the immediate to short term.” [...]