French, German real estate markets set to benefit from Brexit

The constantly evolving impact that Brexit might have might have on attracting overseas investmentis is great news for Britain’s rival French and German real estate markets, says Philip Charls, chief executive of the European Public Real Estate Association (EPRA).

The non-profit association representing Europe’s publicly listed property companies has been active in Asia in the recent three years after seeing surging capital flows from all over the region to other parts of the world, including Europe.

Although international investors tend to turn a bit more cautious after a year of black swan events (Brexit then Trump), they are actually changing their strategy: from going straight to English-speaking countries, usually exclusively UK, to focus on places with a stronger economy, such as France and Germany, said.

Both countries’ office markets, especially, might be among big winners thanks to Brexit.

One serious consequence of leaving the EU is that it means UK financial institutions will lose their so-called “passporting” privileges, that allow their products to be sold to other EU countries without restrictions.

“The impact on financial institutions is big. Imagine a Japanese bank that has an office in London and wants to sell those products in other EU countries. They might have to move their activities to other European locations, most likely Paris or Frankfurt,” said Charls.

The demand for office buildings is already growing in both cities post-Brexit, benefiting from the fact investors find both sites are undervalued in comparison to the UK capital, Charls said — a trend he expects to continue for the next couple of years.