Despite the initial shock of the UK's vote to leave the EUropean Union on June 23rd, it seems unlikely that Brexit will trigger a major economic shock via the financial channel.
European property investment activity dropped by 7% yoy in the first half of 2016, however volumes in all countries were still above their ten-year historic average. Lack of quality product, fewer mega deals and political uncertainty in the UK were some of the reasons behind this drop.
Offices captured 46% of the total transaction volume in our survey area, above the 38% ten-year historic average.
The share of domestic investment increased from 45% in H1 15 to 50% in H1 16. We believe that the lack of product in international markets and a cautious approach towards the UK has shifted major European cross border institutional investor focus back to their home countries.
Prime yields are still hardening, but over the next six months we expect them to stabilise in the majority of markets.