To be fair nobody has any idea when Brexit will be concluded (will it actually go through?) and this has caused some confusion and concern within investment markets. While it is safe to say that demand for UK housing stock has suffered it is very different for warehouse facilities. So, will warehouse facilities be a new long-term investment sector or merely a flash in the pan?
Demand for warehouse facilities
The U.K.’s future relationship with the European Union is fraught with uncertainty at the moment with neither party willing to give way on their “red lines”. While officially there is no chance of a “no deal” because of a recent act of Parliament this does not necessarily mean the end of confusion and concern going forward. The UK now has around six months to agree a Brexit policy within Parliament which will then be presented to the European Union. So, how has this prompted demand for warehouse facilities?
It seems almost inevitable that frictionless trade between the EU and the UK will come to an end if Brexit goes through. This will lead to an increase in customs checks, delays at the border which could have a significant impact on perishable goods, product components and supply chains in general. As a consequence, we have already seen increased demand for warehouse facilities across the UK with companies stockpiling components and, to a lesser extent, making arrangements for the storage of additional perishable goods. Many expect demand to increase dramatically in the future which has caught out those investing in this area of the property market!
Is there long-term potential?
Apart from the fact that frictionless trade between the UK and EU is almost certain to end very soon, there is the added difficulty of importing from further afield. Due to time constraints, many companies will need to stockpile various components used to produce an array of different products. It would make sense to stockpile these components in warehouse facilities, often away from the main business, yet available on demand. So, as the UK looks to expand trade agreements across the globe it is likely there will be greater demand for warehouse facilities going forward.
Why did nobody predict this?
When the Brexit referendum result was announced in 2016 there was surprise and dismay in equal measures. Nobody for a second thought that the UK would vote to leave the European Union – but this blasé attitude by EU supporters backfired. Once the dust settled, experts predicted that the UK and European Union would very quickly agree a frictionless trade arrangement for the good of all parties. Nobody predicted the backstabbing, the infighting and the constant criticism going to and fro between the UK and the European Union. This is not going to be a simple divorce!
How will markets react?
Even now there is concern and confusion regarding investment in new warehouse facilities in the short term. Will Brexit go through? Will article 50 be cancelled? It seems inevitable that we will see further investment in warehouse facilities as the UK/EU relationship seems to be broken. Many believe there is no going back on the “will of the electorate” so those willing to take a chance on developing new warehouse facilities may see enhanced returns compared to traditional markets. But, will Brexit really go through…….