Plans for a £250 million (€300m, $333m) hotel in the Shoreditch area of east London are on ice because of the uncertainty surrounding Brexit, the latest casualty in the commercial property market since the historic EU referendum on 23 June.
Lo Ka Shui, chairman of Great Eagle Holdings and one of Hong Kong's wealthiest people, said his firm was suspending plans to buy land for the new Eaton Hotel after several commercial property funds worth billions halted redemptions by clients. "I need to be in London, but for now I am going to pass and see what happens," Lo told Bloomberg.
London's commercial property market had already been slowing before the referendum amid concern prices had peaked and yields were dropping. The vote for Brexit plunged the UK into political crisis and brought its economic future into question. Some economists expect the country to fall into recession as businesses suspend or withdraw investment. Commercial property would be among the hardest hit if firms decide to invest less in office or retail space, for example.
As investors began to withdraw money, a number open-ended property funds put on a temporary suspension of redemptions over liquidity concerns. This buys the funds time to sell assets and raise capital to pay back to investors. Among those who suspended redemptions were M&G and Henderson Global Investors. Aberdeen Asset Management, also one of those to stop redemptions, has since lifted the embargo.
In the initial days after the referendum, the Financial Times reported that commercial property deals worth £650m had fallen through, including one to buy a vast office on Cannon Street for German fund manager Union Investment, worth around £465m.