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Real Estate Report: Where Next for Development?


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Summary: Is "blame it on Brexit" an easy excuse for sector exposures and the current economic cycle? Alan Wight, Naveen Vijh and Adriano Amorese share their unique insights on occupier demand, availability of finance and contractor's risk appetite three moths after "vote leave".

Forecasting Market Demand

While it is true that "vote leave" led to occupiers rethinking planned moves, the reality is that the uncertainty created by the decision is only one factor to be taken into account when determining space requirements. 

Most occupiers realise that following the ultimate completion of Brexit, whenever that may be, the UK will remain a key location for global businesses. At that point, lease events at existing premises and the shortage of supply of new buildings become more important driving factors. Indeed , in the three months since the referendum, leasing deals are still closing. Headline rents are holding up, but in some cases increased incentive packages have been offered by way of extended rent free periods. 

The present uncertainty means that occupiers' decisions are driven by the need for short to medium term flexibility. Consequently, where a decision is taken to move, we are likely to see even more focus on shorter term leases, multi floor occupations taken on a floor by floor basis, break options, ability to drop floors on a prelet and contractual options to renew...

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Where next for development? Assessing the reality of real estate market demand, development finance and contractor appetite.

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