UK retail giant Kingfisher has been revealed as the mystery buyer on the lookout for a 300,000 ft.² new head office in the City of London. Law firm Cushman and Wakefield has been given the task of finding a potential new headquarters despite the fact that the company recently took on an extra floor at its current premises. This comes as investment markets in the UK continue to struggle with the potential aftermath of Brexit despite the fact there are no signs of a downturn in either sentiment or investment as yet.
New property developments
There are currently a number of new property developments ongoing in the City of London and the fact that the likes of Kingfisher are actively seeking new premises is a shot in the arm for the sector. In the short to medium term we may see a slight downturn in new developments across London and other parts of the UK until the full impact of the UK’s future trading relationships is clear.
If demand continues to grow and developers persist in slowing down their developments in the short to medium term we could indeed see an increase in property prices above and beyond current expectations. It would be rather ironic if concerns over Brexit did lead to a reduction in supply and higher demand than expected. Once this particular cycle has begun it will be difficult to catch up because of the lead time between planning, development and properties being available for actual use.
Is the property sector in limbo?
Brexit is creating a very difficult scenario for the UK property investment sector because demand continues to grow while the supply line is slowly but surely reducing. As we touched on above, if the development side of the UK property market does fall behind it is not simply a case of turning on the taps and catching up overnight.
Those following the UK property market will also realise that any potential bad news regarding the UK economy is highlighted by those against Brexit while ignoring the positive signs. If we see more corporate entities such as Kingfisher actively looking for new premises in London and other areas of the UK this will certainly increase confidence in the sector. It is also worth remembering that UK base rates are at a historic low and unlikely to move higher for the foreseeable future. As a consequence, those looking at developing corporate property assets in the UK certainly have a very low debt cost base to start from.
The have been rumours for some weeks now that a number of firms in the UK are actively looking for larger premises and the Kingfisher announcement has certainly gone down well with property investors. Despite the doom and gloom portrayed by many in the media the UK economy is still set to outperform its European counterpart which prompts the question, why so much perceived confidence in the European Union at the expense of the UK?
Sometimes it is difficult to see the wood for the trees but if you take a step back and consider the situation from a distance, really, why is there so much doom and gloom surrounding the UK?