UK cities have fallen sharply down the ranking of most attractive markets in the Urban Land Institute and PwC’s Emerging Trends in European Real Estate report with London now just one place ahead of Istanbul.

London had already fallen out of the top 10 in the last ranking, published in January, falling to 15thout of 30 but now in the wake of the EU referendum result, the capital has tumbled to 27th with only Istanbul, Athens and Moscow having worse investment prospects for 2017. 

The survey of almost 800 industry professionals also found that the prospects of other UK cities were judged much more bleakly.

Whereas Birmingham was ranked the sixth most attractive city in January, it has now fallen to 22ndfollowed by Manchester and Edinburgh.

The report contained from frank comments from senior industry figures about the impact of the Brexit vote.

“The difference this time from previous shocks is that business doesn’t know what its trading environment is,” said the chief executive of a UK REIT.

Other comments pointed to a weakening in the occupier market in London.

Top 10 European Cities for Property Investment and Development

“London occupiers won’t pay pre-Brexit rents,” said one chief executive of a UK property company. “We’re having to dial back on leasing and rental assumptions,” said another.

Despite this, there was more confidence about the long-term prospects of the capital. For example, one investor said it was “difficult to see why London won’t continue to be the number one city in the world.”

As for the outlook for regional cities, the report said the comments of one interview summed up investors’ doubts: “Will the resurgence of UK second tier cities – Manchester, Birmingham – slow as a result of what’s been happening?

“There may be a flight to core, rather than secondary, and the jury is still out about whether the rebalancing of UK economy has made these cities self-reliant enough to stand on their own two feet.”

The Emerging Trends report also revealed that German cities were now top of investors’ most preferred markets as Berlin, Hamburg, Frankfurt and Munich occupied four of the top five spots.

“The fallout from the Brexit vote gives an extra boost to the already-strong German real estate market,” said ULI Europe chief executive Lisette van Doorn. “With considerable political and economic uncertainty in Europe, many real estate investors are willing to sacrifice some yield in return for lower risk. In this risk-off environment, the stability of German cities becomes even more attractive.”