Overseas demand drives further recovery in UK commercial property - RICS

(Reuters) - Demand from overseas investors is expected to support British commercial property this year even as the UK prepares to leave the European Union, an industry survey showed on Thursday. The pound's slide continued to lure foreign investors over the final quarter of 2016. But the quarterly survey from the Royal Institution of Chartered Surveyors indicated negative growth expectations for London commercial property values amid fears the capital will bear the brunt of any Brexit-led departure of firms. Over the fourth quarter, overall investment enquiries were flat in the London office sector and declined modestly in the London retail segment, in contrast to a second straight quarter of increase in inquiries for the UK, the survey showed. Although the UK commercial property market has largely recovered from an immediate post-Brexit-vote slump, London has underperformed the wider market, with some projects being put on hold, property companies cutting rental growth forecasts and rents beginning to stagnate. Prime Minister Theresa May's comments last week that Britain will leave the European single market has seen HSBC and UBS saying that they could each move about 1,000 jobs out of London. The RICS survey showed that 18 percent of respondents reported evidence of firms looking to relocate away from the UK in response to Brexit, up from 14 percent seen in the preceding quarterly survey. In central London, 32 percent respondents claimed to have seen evidence, the largest proportion of any single region. MSCI's UK IPD index, the most widely tracked commercial property index, showed that 2016 property returns rose just 2.8 percent, versus gains of 13.6 percent and 18.6 percent in 2015 and 2014 respectively. However, it performed better than it had during the 2008 financial crisis, when it lost 23 percent. Nevertheless, continued demand from overseas investors meant that prospects for UK property were by no means bleak, RICS said, with 28 percent more respondents expecting to see a rise rather than a fall in property values over the next 12 months. "The results... suggest the commercial property market is continuing to attract investor interest despite ongoing concerns about pricing in the capital and the prospects for the economy more generally," RICS Chief Economist Simon Rubinsohn said. "Indeed, the feedback we have received is consistent with a renewed appetite from overseas buyers for UK assets." (Reporting by Esha Vaish in Bengaluru; editing by Mark Heinrich)