Achieving Commercial Real Estate Success Post-Brexit

As the United Kingdom's exit from the European Union barrels ahead — pending any additional hiccups or delays — international business owners in American cities with interests in the UK or EU nations have been anxiously watching the proverbial train wreck that is Brexit and trying to ascertain its impact on their international operations.

It is unclear exactly how the UK's departure will be executed and exactly what the impact on the international commercial real estate marketplace will be as government officials in the UK continue their struggle to map the country's exit, now set for October 31.

Yet global investments around the world continue to increase in tandem with steady economic and employment growth in key global markets, including Europe, despite Brexit, according to Deloitte's 2019 Commercial Real Estate Outlook. And, although most investors remain committed to the commercial real estate industry, some CEOs have expressed concern about the stability of a post-Brexit Europe and are focused on minimizing potential instability as it affects their companies.

Concerns include “a flattening yield curve, various country tax reform initiatives, the potential of trade tariffs in the United States, and the uncertainty around the impact of Brexit in Europe,” according to Deloitte.

Business In the UK Post-Brexit

Not all investors and existing UK companies are “spooked” by the UK's planned Halloween exit, and some see Brexit as more of an inconvenience than a threat to future business. UK-think tank New Financial called Brexit “a monumental pain in the balance sheet,” and noted, regarding financial firms in London, that the “industry has always been pragmatic and adaptable, and most firms in the City can and already have adapted to whatever form of Brexit we end up with by opening a new office in Dublin, Frankfurt or Paris, getting a new licen[s]e from the local regulator, and moving anything from a handful to a few hundred staff.” See, “Brexit & the City: throwing the golden goose under a bus?”.

But what about other companies whose investors chose to continue to do business — or launch new enterprises — in the UK? In its 2019 United Kngdom Real Estate Market Outlook report, global real estate advisor CBRE predicts a temporary Brexit-driven “turbulent” political scene could cause hesitation and delay related to property markets, businesses and consumers. CBRE anticipates that a reasonably comprehensive free trade agreement will eventually be reached, but a potential no-deal Brexit mixed with political uncertainty could lead to a gradually weakening global economic environment.

But probably not for long. Uncertainty around Brexit is expected to dampen investment through the second quarter of 2019, but could rebound near the end of the year as Brexit's unknowns decrease, according to CBRE.

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Mathew B. Tully is the founding partner of Tully Rinckey PLLC and Tully Rinckey Ireland. Partner Barry Crushell is Tully Rinckey Ireland's chief operating officer for European Operations. This article also appeared in the New York Law Journal, an ALM sibling of this newsletter.