TWODY Taylor Wimpey PLC (PK)

U.K. commercial real-estate values could fall if Britain votes to end its European Union membership in June, credit-rating firm Standard & Poor's Corp. said in a report on Thursday.

The U.K. is set to hold a referendum over its relationship with the EU on June 23. Uncertainty leading up to the public vote "is likely to have a paralyzing effect on investor decisions on U.K. real-estate purchases," Marie-Aude Vialle, a credit analyst at the credit-rating firm, said in a statement.

Exiting the EU "could potentially reverse the significant boost to real-estate asset values that the U.K., and London in particular, has experienced in recent years," S&P said in a report.

Office buildings in London's main financial district, called the City, would be worst hit, S&P said. Although less so than commercial real estate, housing markets, especially in London, are also susceptible.

S&P is the latest group to warn of a negative impact for the U.K. property markets due to the referendum. The company has previously said its stance on U.K. government credit could suffer should Britain part ways with the EU.

Overseas investors have already been pulling back from London commercial property, such as offices and shops, due to concerns about slowing global economic growth and the collapse in oil prices.

Foreign buyers have long perceived that U.K. property provides a haven from political and financial volatility. A vote to leave the EU in June "would likely threaten that perception of safety," the S&P report said.

S&P has ratings on several U.K. property companies, including Derwent London PLC, Kennedy Wilson Europe Real Estate PLC, Grainger PLC and Taylor Wimpey PLC.

"Brexit would be overall a negative rating event that we would need to evaluate versus the financial cushion they have amassed at their current rating level," the report said.

In addition to weaker demand for property, banks and other financial services firms could choose to reduce office space in London, causing rents to fall.

However, large U.K. real-estate firms have benefited from the recent property boom, and have lower levels of debt compared with the value of their assets—the so-called loan-to-value ratio—than in the 2008 financial crisis, S&P said.

"This provides a large degree of cushion to LTV ratios for large office players in the U.K. should property valuations drop," the report said. For instance, Derwent London had a loan-to-value ratio of just 17.8% in December, compared with nearly 40% in December 2008, S&P said.

Write to Art Patnaude at art.patnaude@wsj.com

(END) Dow Jones Newswires

April 07, 2016 09:45 ET (13:45 GMT)

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