Thursday, 7 July 2016

Brexit: and commercial property in East Devon

Private property companies have been very jittery of late:
Futures Forum: Brexit: and housebuilders in East Devon
Futures Forum: Brexit: and housebuilders in East Devon: part two

And now the commercial property market looks very unstable:

Is Brexit causing a commercial property crisis - and should you care?
Jul 7, 2016
Funds holding £14bn of investors' money suspend withdrawals following the EU referendum result
One of the first concrete signs of negative economic effects from the Brexit vote has emerged in the commercial property sector, where funds holding more than £14bn of investors' money have now been shuttered.
Andrew Bailey, the chief executive of the Financial Conduct Authority, says this is a sign the "market is working", reports The Guardian. A "fire sale" triggering a huge devaluation in commercial property prices would lead to many investors losing money.
But the Bank of England has sounded a warning on commercial property, adds the BBC. It was already concerned that the London market in particular is overpriced and it believes an adjustment could be exacerbated in the wake of the EU referendum result.
Ben Marlow writes in the Daily Telegraph that 75 per cent of small businesses use commercial property as collateral for loans. A significant slump could mean they are "unable either to refinance existing debt or to borrow to invest in new productive opportunities".
He cites research that suggests every ten per cent fall in commercial property translates to a one per cent decline in economy-wide investment. Not necessarily a sign of a big crash, then, but another indicator that growth could be markedly lower in the near future.

More property funds suspended as Brexit tremors continue in the City
Thursday 7 July 2016 
Britain’s vote to leave the EU has sent further shock waves through financial markets, with three more property funds suspended, the pound plunging and share prices falling amid fresh uncertainty about the economic impact of the decision to leave the EU.
Funds responsible for investing some £14bn in shopping centres, office blocks and warehouses have now locked out investors following the decision by Henderson, Columbia Threadneedle and Canada Life to suspend dealing on Wednesday after being swamped by investors attempting to redeem their cash.
The pressure on the commercial property sector – which had enjoyed a 40% rise in prices from 2009 until the start of this year – came after the pound hit fresh 31-year lows
More property funds suspended as Brexit tremors continue in the City | Business | The Guardian

In Devon, the wider industry has been very busy talking things up since the vote:
Brexit: Exeter and Devon property still a safe bet say agents | Exeter Express and Echo

But the reality on the ground is somewhat different - for the big housebuilders:
Persimmon hails rise in house sales as it plays down Brexit fears
Persimmon caught up in housing crash fears | interactive investor

... and for the big commercial property companies:
St Modwen and Persimmon on Brexit impact | Online News | Building

TOP NEWS: St Modwen Profit Down, Cautious Outlook Post-Brexit
Tue, 5th Jul 2016 
LONDON (Alliance News) - St Modwen Properties PLC on Tuesday said its pretax profit in the first half fell year-on-year despite revenue rising and the company said will take a cautious stance on development following the UK's vote to leave the European Union.
"Following the referendum held on June 23, we are now operating in a period of uncertainty in relation to many factors that impact the property market. Whilst it is too early to accurately predict how the UK property market will respond, until we have more clarity we believe it is appropriate to take a more cautious approach to the delivery of our development strategy," said Chief Executive Bill Oliver.

TOP NEWS: St Modwen Profit Down, Cautious Outlook Post-Brexit - Finance News - London South East

Of course, St Modwen is the main developer at Skypark:
Skypark - Exeter and East Devon Growth Point

Meanwhile, in the south of East Devon, a question has occurred to the EDW blog:

WHO WILL FUND THE SIDFORD INDUSTRIAL PARK POST-BREXIT?

7 JULY 2016

Property funds that own offices, shops, industrial units and warehouses are freezing their assets as fundholders seek to remove their investments in them. In a recession, such properties are millstones, as they go quickly into negative equity and are hard to shift unless you do so at a loss.
Businesses contracting and cautious entrepreneurs no longer want accommodation and this leads to a glut of empty properties which exacerbates the problem.
In this climate, who would fund Sidford Fields and why?

Who will fund the Sidford Industrial Park post-Brexit? | East Devon Watch
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