The U.K. commercial real estate market is on "tenterhooks" with investors pricing in even more uncertainty surrounding the British economy than the firms themselves, according to the chief executive of Land Securities.
The continued jitters over the U.K.'s decision to leave the European Union come as the largest listed property company in the U.K. blamed Brexit for sinking to a £95 million ($118 million) loss over the six months to September 30 versus a £708 million profit a year ago.
CEO Robert Noel warned on CNBC Tuesday morning that more uncertainty was still ahead.
"We simply don't know what the reaction of our continental friends is going to be when we serve our notice to leave them," he cautioned.
The slump in Land Securities' first-half profit was largely attributable to a 1.8 percent loss in the value of its assets to £14.4 billion. This figure was mitigated by the firm's decision to divest itself of more than £1 billion of property ahead of the EU referendum.
Noel told CNBC it was too early to tell if the valuation drops are set to persist.
"Whether values fall much further than they have will be a function of where the rental values go, how much tenants are prepared to pay for space and that, in an uncertain environment, we can't tell at the moment, I'm afraid," he said.
Despite slipping into the red, better news was seen at the revenue profit level, where a 4.5 percent uptick to £192.5 million was recorded, as well as in the 9.8 percent lift in the first-half dividend to 17.9 pence per share.
And the Land Securities board remains very positive, says Noel.
According to the CEO, "We are extremely confident…because we have a world-class portfolio, we have low gearing in unsettled times and we have great firepower to take advantage of any opportunities that arise."
"It's the marginal dollar that becomes more hesitant when markets are unsettled," he explained.
Also out Tuesday was a survey from professional services firm Deloitte which showed new building activity in the central London office market screeching to a sharp slowdown in the six months to the end of the third quarter.
The data revealed a 42 percent tumble in new activity with 2.8 million square feet of new office developments across 40 schemes being added to the pipeline to the end of September versus 4.8 million square feet across 51 projects added in the previous six-month period.
The picture on the letting side points to the resilience of new-builds,with nearly 50 percent of recently completed space already let. However,turning to existing space, the picture is far weaker with volume leased in the first nine months of 2016 a significant 37 percent down on last year.
The poor leasing figures combined with a jump in space coming online has pushed central London office vacancy rates from near record lows of around 3.9 percent at the end of 2015 to 4.8 percent by the end of September. "Subdued" appetite from financial services firms has driven the spike, says Deloitte.
While prime rents have held up to date, should the softness continue, they could be the next shoe to drop.
Land Securities' Noel advised watching timetables, observing, "It'll be very interesting to see how many development intentions get moved out."
Chris Lewis, head of occupier advisory at Deloitte Real Estate told CNBC via email that it was time for developers to proactively address a changing market.
According to Lewis, "There is a very real challenge looming for developers caused by a changing occupier demand pattern resulting from challenges faced not only through political and economic change but also operational disruption relating to aspects like millennials, technology and automation."
"The best way for this to be addressed in building terms is to create the most flexible space possible allowing for choice around specification, layout and quantum," he recommended.