How Brexit Will Impact Miami Commercial Real Estate

Downtown Miami

MIAMI—Since the Brexit vote, the British pound dropped to its lowest level since the 1980s. That, of course, means European buyers are at a disadvantage in the US market. So says Louis Archambault , a partner in the Miami office of Arnstein & Lehr LLP . During the recession, South Florida real estate became a bargain for Europeans. A strong Euro helped these foreign investors snatch quality assets at a significant discount. That trend may reverse as economic and political turmoil in the UK and the European Union weakens the Euro against the US dollar. “European investors may decide to sell their investment properties in South Florida to reinvest in their countries if property values drop as a result of the political crisis,” Archambault, who has been working with European investors for more than a decade, tells GlobeSt.com. ”If your currency is weak, it actually encourages investors to invest in their own country and people to buy its products.” What does this mean for South Florida? Europeans’ disposition of commercial real estate assets will be a boon for South Florida by virtue of the fact that it drives transactions. Says Archambault, “The worst thing that can happen to a local market is when nothing is changing hands.” Andrew Cohan , managing director of the Miami office of Horwath HTL , tells GlobeSt.com he’s already seen an impact on global markets, at least the markets that react in real time, the stock exchanges. The real question, as he sees it, is whether there will be a lasting impact on global markets. “After the first week of January this year, when the Chinese markets tumbled, my business, which depends heavily on new hotel development, did not receive a phone call for 10 days,” Cohen says. “However, by the end of January business was back to normal.” With so much uncertainty surrounding Brexit , Gerard Yetming , executive vice president at Colliers International South Florida , tells GlobeSt.com, international investors that once saw London as a safe haven will begin exploring other global gateway cities like Miami. While the British have historically only focused on residential real estate , he says, we can expect to see an influx of foreign investors looking at Miami for other investment opportunities like commercial real estate , which remains relatively low in price compared to other gateway cities such as New York and San Francisco. “We have already seen an uptick in Latin American investor activity in the commercial space as instability in their home markets persist,” Yetming says. “We think that there will be a similar uptick in European, Middle Eastern and Asian investor activity as they look for alternatives to London.” As a stock analyst reported, in times of uncertainty there is investor flight to quality assets. During this market cycle, Cohan says, quality assets in the hotel industry have been defined as hotels in gateway cities, such as London, New York, and Miami, especially for investors based in the Middle East and Asia. “With London, and to a lesser extent the remaining EU nations, at least temporarily suspended as ‘safe havens,’ there could be a short- to medium-term windfall for hotel and other commercial real estate owners in major US Markets such as New York, Miami, Honolulu, LA, Chicago, and San Francisco,” Cohan says. “In the longer term we can expect London to return to its ‘pre-Brexit’ status just as Hong Kong did after the period of uncertainty it weathered surrounding ‘the Handover’ of the territory from the UK to China in 1997.” South Florida already has strong economic ties with the United Kingdom when it comes to trade and is home to more than 60 British multinational companies, according to the Beacon Council, a private-public agency that attracts businesses to Miami-Dade County. The United Kingdom is also an important source of visitors for Miami-Dade, with 326,000 visitors in 2015. South Florida also has a population of about 26,000 individuals who were born in the United Kingdom. As Archambault sees it, Brexit may also benefit South Florida by attracting investors who, regardless of the strength of the currency, will want to move their money to a stable economy. “When there is a lot of uncertainty you look for a stable situation, and a lot of real estate investments are safe investments in terms of land banking,” he says. “And South Florida is an easily reachable destination from London.” Cohan’s bottom line: Economic and political shocks seem to recover in the same manner as natural shocks such as hurricanes and earthquakes. There are always individuals who find a way to profit in the aftermath and reconstruction as well as many who get temporarily or permanently displaced. But eventually, a new order is restored.