(Ed. Note: This story originally appeared on GlobeSt.com, an ALM-affiliated publication.)

CHICAGO—Last week’s Brexit vote sent tremors through the world economy, and people around the globe have been struggling to understand its implications. But even though some worry Britain will plunge into a recession, and perhaps pull other countries down as well, the long-term effect on commercial real estate, especially in the US, remains unclear. However, UK voters did at least bring clarity to some issues.          

“It’s going to extend the era of low-interest rates even longer,” David Scherer, a founder and principal of Chicago-based Origin Investments, tells GlobeSt.com. And that’s not just a personal opinion. “The market now estimates that LIBOR will stay low for an extended period.” And traders now believe with a high degree of certainty that the Federal Reserve won’t raise interest rates before December, and even then there is only a roughly 15% chance of a rate hike.

The expected low interest rates will create higher valuations in all asset classes, Scherer adds. “What we don’t know is how Brexit will affect growth,” and if it does, whether that will hurt U.S. real estate in general. Hotels would take a hit if the U.S. economy slowed, but other sectors such as office and multifamily typically show more resilience. In Houston and many other cities, for example, multifamily properties rise and fall on the strength of the healthcare market, which can grow even during downturns.            

That resilience should also keep foreign capital flowing into U.S. real estate. “Foreign investment has been waning a bit in the last few years,” says Scherer, as buyers from Russia, China, the Middle East and South America struggled with low oil prices, slowdowns and outright recessions. “But there is now going to be more pressure on people to enter the US. We’re just not as risky as these other economies.” 

But whatever turmoil set off by Brexit, Scherer does not believe that overseas investors will go looking for opportunities in secondary markets. “It’s not a trend that I’m noticing.” Many will, however, avoid the highest-cost markets such as San Francisco and New York, and concentrate efforts in institutional, non-gateway cities such as Chicago, Dallas, Austin and Denver. “They will be getting a very similar rate of growth but with higher cap rates.”  

“Uncertainty is the enemy of growth,” Scherer says, and that means Britain and the European Union could be in for a rough time, especially since British leaders do not yet have a plan to handle the crisis. But for the US, with that uncertainty strengthening capital flow into the US, “I think we’re in for another two years of what we’ve seen in the last five years,” namely, slow but steady economic growth and increasing values. “I like the situation we’re in.”

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