Hard Brexit not necessarily bad for London office prime yields

We have performed a modeling exercise to assess London office market developments in two polar Brexit outcomes , a hard versus a soft Brexit. The model implie s an abrupt drop in the take-up and a complete ceasing in office rental growth in the event of hard Brexit on the back of GDP contraction and S terling fall . Over time the model foresees the take-up and rental growth to recover as the economy benefit s from monetary stimulus and a more competitive level of sterling. In contrast, prime yields would rise in the event of hard Brexit as the losses in office capital value more than offset the fall in office rents . Including an additional variable, which accounts for London’s role as a financial center, and assuming a decline in London’s competitiveness relative to other world’s leading financial centers, the model still suggests a rebound in office prime yields but to a lower extent. This suggest s that a reduced importance of London in the global financial spectrum would result in a more severe adverse effect on the office prime rents. Thus, the degree of access to EU financial markets after Brexit remain s one crucial factor to watch.