Estate agent Savills said profits at its British commercial property business more than halved in the first six months of the year, hit by uncertainty in the run-up to the EU referendum that has made it harder to predict the full-year performance.
Savills, which makes 40% of its revenue in Britain, said it had seen a “significant fall” in transaction volumes ahead of the vote, pushing underlying profits for the UK commercial business down 54% in the first half.
Commercial property was one of the first areas affected by the referendum, with investors pulling cash out of funds and forcing many to be suspended — at one point freezing more than £18bn (€21.2bn) in the system.
In the residential sector, leading agents such as Foxtons, Countrywide, and Rightmove also reported a fall in transactions as the uncertainty sparked by the historic vote hit a previously booming industry.
Savills said it was maintaining its full-year expectations but chief financial officer Simon Shaw said the range of possibilities had widened. The shares which have fallen 20% this year were up slightly yesterday.
“We really just don’t know which direction various sub-sectors of the market are going to take in terms of volumes,” he said. “The high is higher, and the low is lower.”
Industry surveys had indicated that interest in commercial property was waning in the run-up to the vote, with the Royal Institution of Chartered Surveyors reporting the largest drop in investment demand on record in the second quarter of the year.
Savills said that had been sparked by many of the larger sovereign wealth and private equity firms sitting on the sidelines in central London, allowing wealthy individuals to get good deals in commercial property. Since then the market had stabilised, it said.
“Now, we’re back to a more normal market where we’ve got all the big players back,” said chief executive Jeremy Helsby.
“Assuming that we start to see volumes picking up, which we are seeing at the moment, I would expect the second-half performance to be better than the first half.”
In the British residential market, transaction fee income rose 10% in the period but Helsby said the immediate signs were that transactions would be slightly down in London in the weeks since Britain voted to leave the EU.
Underlying profit at the firm — which operates in Britain, Asia, continental Europe and the US — rose 11.5% to £42.8m in the six months, with other markets compensating for falling revenue in Britain.
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