A potential U.K. exit from the European Union is causing foreign real estate investors to hold off on property investments in the country until after its June 23 referendum on the move.
Some investors are using the pending vote, dubbed Brexit, as a reason to delay committing to real estate funds with heavy U.K. bias, said Nancy Lashine, managing director and founder of New York-based placement agent Park Madison Partners.
The impending Brexit vote has caused real estate investment volume to drop in the U.K., said Sabina Kalyan, a London-based managing director and head of European research for real estate manager CBRE Global Investors.
Non-U.K. managers and investors, especially, are putting off investments until the end of June, Ms. Kalyan said.
Should the U.K. leave the European Union, the pound is expected to depreciate sharply and investors want to get the currency timing right, Ms. Kalyan said.
“It's a significant worry for investors,” said Colm Lauder, a vice president at MSCI Inc. based in London.
MSCI surveyed U.K real estateinvestors in February, and some 80% indicated they thought there would be a severe negative impact on property performance should the vote be to leave the EU, Mr. Lauder said.
Should the U.K. stay in the EU, real estate investment activity could increase, Ms. Kalyan said.
Joe Valente, a London-based managing director and head of research and strategy, European real estate with J.P. Morgan Asset Management, doesn't see cause for concern.
“Brexit is a storm in a tea cup,” Mr. Valente said. “Whether the U.K. remains or exits the EU, the impact on the market is likely to be short lived and modest.”
There will be a temporary hiatus of real estate investment, he said.
“But this shouldn't be seen as leading to a permanent weakness in the economy or real estate market,” Mr. Valente added.
Some investors think there is a possibility that a U.K. break from the European Union could lead to investment opportunity.
“Uncertainty creates investment opportunity by managers with capital,” said Jonathan Grabel, chief investment officer of the $14 billion New Mexico Public Employees Retirement Association, Santa Fe. “With challenge and risk is inherent opportunity.”
