Oil refinery

Sterling devaluation benefits the UK's oil and gas industry

The shift in currency and consequential devaluation of Sterling following the UK’s decision to leave the EU has had a mixed effect on the UK’s real estate industry.

The commercial investment market has attracted interest from international money looking for discounted assets (Sterling devaluation alone has seen entry prices appear 15-20 per cent cheaper than four months ago). On the flip side currency market volatility has directly impacted overall build costs with Gardiner & Theobald reporting that a 10 per cent decrease in the value of the pound has resulted in a 2-3 per cent increase in build costs, where 60 per cent of materials are EU imports. Meanwhile, the luxury retail sector along with hotels, particularly in Central London, have benefitted from an increase in tourist and shopper footfall.

Currency movement is also having a notable effect on the oil and gas industry which is, in part at least, offsetting the downturn experienced due to the drop in oil price. The reason for this is because Brent Crude Oil is priced and traded in US Dollars per barrel. The drop in the value of Sterling against the US Dollar has resulted in an almost instantaneous increase in the competitiveness of UK based companies who now offer a discount. As a result a number of businesses located in Aberdeen are reported to be winning contracts in the Middle East, South America and so on, and servicing them from Aberdeen.  

As Scotland continues to increase its exports related to the oil and gas industry this new competitive edge is particularly significant and, while it's too early for the uptick in global mandates for Aberdeen companies to influence their real estate decisions, it's a positive turn in events that is good for sentiment in the city.

Our data shows that Aberdeen witnessed a modest pick up in office take-up during the third quarter of 2016, with 64,550 sq ft of space taken, the strongest quarter in terms of take-up recorded since Q2 2015, and a total office take-up of 146,514 sq ft to year date. We’re a long way from where the market was three years ago but the wheel continues turning.

Further information

Read more: Brexit Briefing:The Impact on UK Regional Offices

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