(Reuters) - UK-based real estate services provider Savills (SVS.L) saw a sharp drop in commercial transactions in Britain in the first half as uncertainty ahead of Brexit made investors cautious.
Longer term, the company said overseas investors were still committed to London, seeing it as “comparatively secure in a global context”, and some big firms were looking to expand their footprint in the city.
In the first half of the year, though, Savills said its UK commercial transaction fee income dropped 14 percent from a year earlier to 33.9 million pounds, although that was also due to reduced stock after some big transactions in the same period last year.
Britain is Savills’ biggest market and weaker business there contributed to an 18 percent drop in the group’s first-half pre-tax profit to 26.7 million pounds, sending its shares down more than 5 percent.
The group said it had faced “challenging market conditions” in the first half. However, despite “escalating political and economic uncertainty”, it said it had a robust pipeline of activity for the second half of the year.
“If you talk to our investment clients, they are taking a long-term view on UK ... We are still seeing investment in the UK, even with the Brexit uncertainty,” Chief Executive Officer Jeremy Helsby told Reuters.
London’s office market saw transactions worth 9 billion pounds in the first half, 71 percent of which were to non-domestic investors, Savills said. This compared to 10 billion pounds in deals in the same period last year when 78 percent were for overseas investors.
Britain’s property market has lost some of its sheen since the Brexit vote, which led to increased uncertainty among investors. Concerns remain as firms are expected to relocate jobs from London, specially in the finance sector.
At the same time, though, a weaker pound and higher yields have made British real estate more attractive to some investors.
“It is a combination of domestic investors still remaining strong and Asian investors very strong and American investors and a few European. It is a pretty eclectic mix across the globe,” Helsby said.
Most of the Asian investors came from Hong Kong, he added.
Savills advised on Facebook’s (FB.O) lease of office space at London’s Kings Cross area, signed in July and the fifth largest leasing deal on record in Britain.
“What we have seen is actually some major occupiers committing to London ... There is a lot of hot air at the moment, but the facts are people are continuing to expand and grow into London,” he said.
Savills shares were down 5.4 percent at 817.5 pence by 0935 GMT.
Outside of Britain, Beijing’s heated trade dispute with Washington led to delays in commercial property transactions in the first quarter, particularly in the Asia Pacific, Savills’ finance chief Simon Shaw, said.
“We did see a slowdown in transactional activity which has resulted in a significant pipeline in the second half, particularly in our Asia- Pacific region, and you may attribute some of that to sentiment over the macro political events that were going on at the time,” he said.
Reporting by Noor Zainab Hussain in Bengaluru; Editing by Amrutha Gayathri and Susan Fenton