Central London office values would probably suffer if UK voters give Prime Minister David Cameron the chance to hold a referendum on European Union membership, according to industry experts.
Foreign buyers, who accounted for three quarters of the £19.4bn (€28bn) of central London properties traded last year, would probably hold off on buying in the months leading up to the vote, said Joe Valente, head of research and strategy at JPMorgan Asset Management.
Meanwhile if the UK did quit the EU, more than 60pc of real estate investors surveyed by CBRE said they'd be less likely to put their money in the country.
"The nightmare scenario is if those foreign buyers suddenly think 'let's hold off for six or 12 months,'" Mr Valente said. "The inevitable result is that we're going to lose some pricing, because that weight of capital isn't there," the Morgan executive added.
UK Prime Minister David Cameron has promised to hold a vote on membership by the end of 2017, after renegotiating terms, if he's still in power after the May 7 election.
"There's been this sense that the UK has been a safe haven for a very long time and that's clearly attracted a large share of global capital," said John Feeney, managing director and global head of commercial real estate at Lloyds Banking Group.
"If that's undermined somewhat, a lot of clients feel that could have an impact," Mr Feeney noted.
Mr Cameron's Conservatives and the opposition Labour Party are almost neck-and-neck in opinion polls that suggest neither party will win an outright majority in the election. Labour says that leaving the EU would hurt trade, job numbers and the economy. Mr Cameron however, under pressure from the right wing of his party, is seen as using the referendum as a device to placate his Euro-sceptic back benchers. The prime minister himself has said he wants Britain to remain in a "reformed" European Union.
The attraction of commercial properties in the British capital has grown as global investors seek higher yields than government bonds offer amid record low rates.
Central London office rents will climb 17pc this year, the most since 2000, as tenants compete for a dwindling amount of space, according to BNP Paribas's real estate unit.
The value of offices in the City of London business district climbed 16pc to £1,471 per square foot last year, while those in the West End rose 10pc to £2,867 per square foot, according to broker Knight Frank.
"The UK is by far the most liquid and transparent real estate market in Europe," said Mahdi Mokrane, head of research and strategy in the region at LaSalle Investment Management.
"With a Brexit, that would put a lot of investors back to their drawing board and we think their strategy is probably going to be a pause."
Billionaire Joseph Safra in November agreed to pay about £726m for London's Gherkin skyscraper.
Amancio Ortega, the billionaire owner of clothing retailer Inditex, the parent of chainstore Zara, in December 2013 paid about £410m for Devonshire House, a 1920s Mayfair district property opposite the Ritz Hotel.
Qatar Investment Authority and Brookfield Property Partners succeeded in January in buying Songbird Estates, the company that controls London's Canary Wharf financial district. The deal valued Songbird at about £2.6bn.
Should the vote go ahead, "how will the EU react, what existing relationships change, how sustainable will they be, what sort of renegotiation will happen?" said Mokrane. "We have a whole list of questions."
Still, a decline in prices could stem concerns that investors are bidding prices up to unsustainable levels in their search for yields while government bond yields remain at historic lows.
"I think it'll just take the froth off the market, which isn't a bad thing," said Valente.
"Sooner or later there's going to be a correction. It just depends if it's next year or in five years time when interest rates suddenly increase." (Bloomberg)