28-04-2017

Brexit — Passports Please.

Early 2016, about 3 months before the Brexit vote, GeoPhy conducted research looking into how international companies could reposition themselves post-Brexit, focusing on US and Asian banks and financial services companies who with offices in the capital of England. We believed that predicting the likelihood of Brexit would be a futile exercise, but that it would be possible to assess its potential impact on the commercial real estate market. We designed a dynamic stress test that combined our deep, data-driven knowledge of the London office market with two primary value drivers:

Yield (a simple measure of a building’s NOI divided by its value) — As a global financial hub, both office users and investors have always looked at the London market. This ensures high rent levels combined with a low risk profile, leading to highly priced assets.

Footprint (measured in square feet) — The hub function for the London market is, for many non-European institutions, a very easy and convenient primary location for access to the wider European market. This is facilitated by a legal framework known as a Banking Passport, an element which is quite likely to change or disappear following the full Brexit process. The direct impact here is on financial institutions, which would have an additional ripple effect on consultants, auditors, law firms and other support services.

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Author: Nils Kok