The decision by United Kingdom voters to exit the European Union was roiling financial markets Friday, with the Dow Jones Industrial Average and the Nasdaq indices down between 3 and 4 percent midday.
The historic vote could have huge implications for international investment of all kinds, but one expert says the Puget Sound region’s commercial real estate market likely won’t be dramatically affected by the so-called Brexit vote. The one real estate exception is the industrial market.
Gerard Mildner, director of Center for Real Estate at Portland State University said the direct impact of Brexit will mostly be felt by Britain and the EU and will probably have a minimal direct impact on the United States’ economy and commercial real estate.
International investments by overseas buyers in the greater Seattle area has been soaring. But unlike Chinese investors, who poured more than $1 billion into commercial real estate investments in the region in 2015, UK investors invested a mere fraction of that.
British investors bought nearly $40.2 million worth of commercial real estate in the Seattle region last year, according to Real Capital Analytics. That compares to nearly $1.1 billion by Chinese investors. In late 2014, the U.S. affiliate of St. Bride’s Manager, a global real estate investment manager headquartered in London, paid nearly $10.1 million for a downtown Seattle office building.
Peter Orser, interim director of the University of Washington’s Runstad Center for Real Estate Studies, said that it’s too early to tell what effect Brexit will have on the region’s commercial real estate market. The Brexit vote will have repercussions for the banking industry, which he said will have a latent effect on property markets.
Mildner said the risk is that other countries will copy Britain and impose trade barriers. The most exposed U.S. sectors will be export businesses, such as aerospace, agriculture and technology, and port-related industrial property and the financial industry.
Microsoft (Nasdaq: MSFT) stock was down more than 4 percent, and Boeing (NYSE: BA) was off 5 percent. Wheat prices dropped less than 1 percent. Stock of Prologis (NYSE: PLD), a global warehousing company with facilities in the Puget Sound region, was down nearly 4 percent.
Marc Stiles covers real estate for the Puget Sound Business Journal.