Despite the turbulence of the markets in recent days following Brexit, for many real estate businesses, the referendum result presents an interesting period to capitalise on the UK market. The UK is often seen internationally as a gateway to Europe, due to factors such as its language, its pool of international talent and its lower market regulation compared to other EU members. The EU is also the source of much of the foreign investment that comes into the country. Will Britain be as attractive as a location following Brexit? What will be the effects of Brexit on recruitment for British businesses? Some industry watchers claim that the Brexit result could lead to renewed market activity in the real estate scene. The first 6 months of this year has been characterised by a wait-and-see attitude, with many investors delaying decisions until after the vote and a consequent decline in transactions.
An increase in foreign activity
Now, activity is likely to pick up quickly, with many foreign investors seeking to take advantage of the fall of the pound to make acquisitions. Recent reports have suggested that the retail and residential sectors are likely to benefit from bargain-hunting investors taking advantage of the fall in the value of the pound. The hotels sector will also thrive as tourist numbers rise because of a weaker sterling.
‘For overseas buyers, this big and dramatic drop in the value of sterling will effectively offset the stamp duty and tax adjustments and it will make prime London property a lucrative investment for overseas investors bold enough to take a punt despite the market uncertainty,’ said Peter Wetherell, CEO of London-based residential agent Wetherell.
However, some deals that had been negotiated prior to the Brexit vote may collapse, as they contained a clause which made them void in case of a decision to leave the EU. JLL is forecasting a decline in economic growth and a decrease in investor sentiment longer-term. If companies chose to withdraw their European offices from the UK, they would be taking both their jobs and investment away with them.
Occupier market is still strong
However, the occupier market is still strong with many financial centres being based here; London is one of the best places in the world to base businesses. Two in five of the 250 largest companies in the world with European headquarters have it in London, including the likes of Samsung, BlackBerry and Mitsubishi. Moreover, it is generally accepted that it is easier for companies to stay in a country than to relocate overseas. Sentiment with clients I am speaking to is positive overall, with many saying that there is now an emphasis on becoming more agile and unearthing opportunities which may not have surfaced prior to the vote. Although occupier demand may weaken in line with economic growth and declining business sentiment, the impact on rents may be limited by tight supply. Many firms that were experiencing a slowdown in investment turnover would argue that investment this year would not have exceeded the boom from last year in any case. As we know, the real estate market is cyclical, and given the rapid rise in the UK property market over recent years, things are likely to plateau. Equally, direction and a strong hand to lead the country through this unstable period is what many are hoping for so that the UK can come out of this a stronger, and more international economy.
Legal benefits for employers
Brexit could have legal benefits for UK employers. Excessive ‘red tape’ has long been seen as a disadvantage of EU membership. Some are now suggesting that the government could be tempted to repeal laws such as the EU working time and agency workers’ directives which have traditionally made recruiting temporary workers time-consuming for both recruiters and candidates. EU laws which underpin other workers’ rights, such as anti-discrimination legislation and maternity and paternity leave, will probably still stay in place given how politically dangerous it would be to change these. This means that overall, it is likely that Brexit will have a positive impact for candidates, particularly temporary workers, as well as a quicker turn-around time and more efficient service to clients who take on temps.
A candidate-led market
Some say that EU workers will leave the UK as a result of Brexit; this could herald a shift in the job market towards British employees, with the battle between businesses for the best talent intensifying even more than in recent years. The result would be an increase in salaries, particularly for those candidates with skills in demand such as property management, valuations and rating. Good news for candidates, but not such good news for real estate companies who may have to pay more to fill positions and retain staff. Recruiters will therefore play an even more pivotal role in helping real estate firms recruit and retain the best talent.
The bigger picture
Amongst the uncertainty that many firms are facing, let’s remind ourselves of the numerous benefits that we can now look forward to now that we are out of the EU; we can build a more competitive economy, decide whether to have more or less free trade, more or less migration, more or less infrastructure investment, enjoy cheaper and more efficient imports of international food and other goods, negotiate free trade deals with the rest of the world and control immigration. Real estate companies will benefit from the opportunities that Brexit has presented, making the UK economy stronger and an even more attractive proposition for investment in the longer-term. In the mean time, attracting candidates who are able to add value has never been more vital for companies looking to weather the storm, and partnering a proactive and specialist recruiter is key to achieving this.
Winberg Associates are a specialist real estate recruitment and executive search supplier to niche, medium-sized and global consultancies, funds, developers and private equity firms.
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