Savills says UK commercial property business hit by Brexit vote

By Costas Pitas

LONDON (Reuters) - Estate agent Savills (SVS.L) said profits at its British commercial property business more than halved in the first six months of the year, hit by uncertainty before the EU referendum that has made it harder to predict the full-year performance.

Savills, which makes around 40 percent of its revenue in Britain, said it had seen a "significant fall" in transaction volumes ahead of the vote, pushing underlying profits for the UK Commercial business down 54 percent in the first half.

Commercial property was one of the first areas affected by the June 23 referendum, with investors pulling cash out of funds and forcing many to be suspended -- at one point freezing more than 18 billion pounds in the system.

In the residential sector, leading agents such as Foxtons (FOXT.L), Countrywide (CWD.L) and Rightmove (RMV.L) have also reported a fall in transactions as the uncertainty sparked by the historic vote hit a previously booming industry.

Savills said it was maintaining its full-year expectations but Chief Financial Officer Simon Shaw said the range of possibilities had widened.

"We really just don't know which direction various sub-sectors of the market are going to take in terms of volumes," he told Reuters. "The high is higher, and the low is lower."

SIGNS OF STABILISATION

Industry surveys had indicated that interest in commercial property was waning in the run up to the vote, with the Royal Institution of Chartered Surveyors reporting the largest drop in investment demand on record in the second quarter of the year.

Savills said that had been sparked by many of the larger sovereign wealth and private equity firms sitting on the sidelines in central London, allowing wealthy individuals to get good deals in commercial property.

Since then the market had stabilised, it said.

"Now, we're back to a more normal market where we've got all the big players back," Chief Executive Jeremy Helsby told Reuters.

"Assuming that we start to see volumes picking up, which we are seeing at the moment, I would expect the second-half performance to be better than the first half," he said.

In the British residential market, transaction fee income rose 10 percent in the period but Helsby said the immediate signs were that transactions would be slightly down in London in the weeks since Britain voted to leave the European Union.

"I can't give you the stats yet but it would have been quieter than last year," he said.

Underlying profit at the firm -- which operates in Britain, Asia, continental Europe and the United States -- rose 11.5 percent to 42.8 million pounds in the six months, with other markets compensating for falling revenue in Britain.

Savills was boosted by strong residential growth across its regions and many commercial markets including in China where revenue rose 70 percent. Shares in the firm were up 1 percent to 692 pence at 1010 GMT.

(Editing by Kate Holton and Keith Weir)