London will be fine despite Brexit, says Brookfield RE CEO

Brian Kingston is the CEO and Managing Partner of Brookfield Property Group and Brookfield Property Partners. Both companies are part of the Brookfield group which currently operates in 30 countries with over $194 billion in real estate assets under management.

We received Brian at a club meeting last week in Sao Paulo, where he met with our senior level club members for candid discussion and high level debate. When was asked what Brookfield’s plans were in the UK regarding recent economic and political changes, he asserted that London will remain the center of commerce in Europe, despite Brexit:

“In terms of offices, activities have been very strong in London and the rents are pretty good. Our approach has been to just keep vacancy as low as possible; our leasing is currently at 98%. So that business is relatively well insulated from the existing supply that’s there, and will most likely only affect development.”

“Even if it is a hard Brexit on October 31st, I think we need to just keep moving forward. Our view on long term is that EU or non-EU, London is still a centre of commerce in Europe; it’s an English speaking country with a good rule of law, favourable tax system and lots of good infrastructure. That won’t change because of Brexit.” 
 

The British Government has had three years to work through the specifics of leaving, but very little progress has been made. The side effect of this is leaving the markets and the British public with more uncertainty than anything else. For Brian, this is more of a speed bump than the car crash that some claim it to be:

“So while there may be some short term disruption, we plan to just move through all of that. All it’s really affected so far is the capital market side, which is seeing delays because the economic uncertainty means nobody’s buying and nobody’s selling. That whole market is virtually frozen. When we learn whether we’re due for a hard brexit or a softer brexit, we’ll see the capital markets opening up again.”

“We speak to our tenants all the time, and no one's just picking up 5000 jobs and moving them out of the UK because of Brexit. CityBank has 9000 employees in the city of London. Since Britain announced it was leaving the EU, they’ve moved 20 of those jobs to continential Europe. In the same time period, Amazon has created 6500 jobs in London. And this isn’t even taking into account what Google or Facebook or any of the big banks are doing.”

“They just want to be in London, for the same reason they’d want to be in New York such as accessible and diverse talent pool or great public transport. So I think London will be just fine. The rest of the UK may be more challenging because it doesn’t have that same profile, so you’ll have higher labour and employee costs. It would be better if there was no brexit at all, but we’re not concerned about the long term impacts particularly.”


As we approach the October 31st Brexit deadline, senior leaders from major real estate companies across the continent gather in Paris on 11-12 September for Europe GRI. With over 500 C-level participants already confirmed, it is set to be our largest event in a decade, and will provide unique insight and candid discussion across all asset classes. 


Article by Matt Harris