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U.K. break from E.U. could impact U.S. CRE markets

Commercial real estate investors in Missouri could soon face new competition from abroad. In the wake of the U.K.'s exit from the European Union, the British CRE market will become characterized by heavy confusion. During this time, comparatively stable American markets may become increasingly attractive to investors who once favored commercial property in cities like London.

There is some evidence that the exit will also impact how the U.S. Federal Reserve modifies interest rates. The Fed previously acknowledged a possibility of economic risk associated with the event, and major banks headquartered in the U.S. are planning to withdraw thousands of employees from London. Some investment specialists say the majority of economic fallout will be limited to the U.K and the E.U., which could make U.S. CRE markets even more interesting to foreign players.

Some of the new investment capital in U.S. markets may even come from the U.K. It should be noted, however, that the effects of the Brexit leave vote are projected to persist only for the short term. One researcher claimed that any associated increase in yields should taper off by the end of 2017. Others believe that the comparative lowering of the pound's value could actually reduce foreign direct investments.

International events can impact the viability of local CRE investments in many ways. Evolving trade relations and regional destabilization have the power to make deals that once seemed lucrative lose their appeal to backers and business partners. Investors and developers may benefit from talking to lawyers about how a proposed commercial development might be impacted by uncertainty.

Source: National Real Estate Investor, "Brexit Could Bring More CRE Investors to U.S. Shores," Diana Bell, June 24, 2016

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