The post below was first published on our UK Real Estate Development blog
In the week before Christmas, the daffodils were blooming, the birds were chirping and it was warm enough to cycle to work in shorts. In the week before Easter … well, nothing much has changed. And that pretty much sums up the development market in Q1. Transactions held over from December were duly completed, but the dealflow since then has been been falteringly slow.
MIPIM, always a good barometer of market sentiment, was summed up by the weather too – it was not nearly as balmy as expected and left you feeling let down and a bit foolish that you’d brought your sunglasses.
Much of this is being driven by Brexit. Whilst I don’t think the vote will make a big difference to development in the UK either way, it is the uncertainty of whether we will end up in or out that is causing stasis. Like Schrodinger’s cat being alive and dead at the same time until the box is opened and the quantum waveforms collapse, investment decisions are quite reasonably being held back until the outcome of the referendum is known.
In London, we also have a Mayoral election to contend with. Ken Livingstone and Boris Johnson may have been at opposite ends of the political spectrum, but both were firmly pro-development. Looking at Sadiq Khan and Zac Goldsmith on the hustings, I am not convinced that the next four years will be quite so developer-friendly.
Development has always been a Q2/Q4 business of course, so a slow winter is not that unusual. This feels like a pause for reflection rather than a sign of deeper retrenchment. To lift a metaphor off the back of England’s Grand Slam victory, we’re just waiting for the referee to call “set” before the front row engages again.
So, here are my predictions for Q2: