Moody's: Brexit vote to negatively affect UK commercial real estate market

The US ratings agency, Moody’s Investor Service, published yet another report on the impact of Brexit on the UK economy, this time underscoring the challenges faced by the UK’s commercial real estate market post- Brexit.

Key points from the report:

“The United Kingdom's (UK) vote to leave the European Union (EU) will be credit negative for the country's commerical real estate (CRE) market, and subsequently most UK commerical mortgage-backed securities (CMBS) transactions.”

"In a base-case scenario -- in which we anticipate a new UK-EU trade agreement and UK GDP growth of 1.8% in the long run -- we expect average UK commercial real estate values to decline by up to 10%, depending on property type, quality and location.”

“Uncertainty over future UK/EU trade relationships is weighing on commercial real estate fundamentals, with delays in investment decisions and increased property risk premium.”

“If London were to lose its "safe haven" status with foreign investors, it is likely that transaction volumes as well as property values would fall.”

“Over the last two years, foreign direct investment has accounted for over two-thirds of all CRE transactions in central London, with the remainder outside the city, according to commercial property and real estate services adviser CBRE.”