UAE and Japan outperform, while Russia and Brazil falter, reveals RICS Global Commercial Property Monitor Q1 2014
The Q1 2014 RICS Global Commercial Property Monitor shows, on balance, a pickup in commercial real estate sentiment across the globe, even if certain regions struggle against a more challenging macro backdrop.
The UAE and Japan are once again amongst the front runners, as momentum continues to build at a healthy rate. Indeed, the Occupier Sentiment Index (OSI) and Investment Sentiment Index (ISI) stand above 40 and 50 respectively, for these two nations.
Furthermore, the longer term outlook is suitably bright for both occupier and investment markets, evidenced by the Monitor’s twelve month indicators, with healthy rental and capital value gains expected during the course of 2014.
Upbeat results were also returned from contributors from the US, New Zealand and Singapore real estate markets, with both the OSI and ISI readings still comfortably signaling improvement. The robust figures are indicative of growing confidence, which has been fairly consistent throughout the last few Global Commercial Property Monitors.
Across the Euro area, a degree of divergence appears to be emerging as the recovery in commercial property gains traction in some member states, while the progress in others stalls. Sentiment indices remain particularly downbeat throughout France and the Netherlands, despite both of these nations formerly exiting recession during the latter part of 2013. By way of contrast, a significant improvement is now visible in Ireland, Spain and Portugal. In fact, investment transaction expectations are now higher in these three nations than in any other countries included in the survey.
Going forward, this is anticipated to translate into a sharp rise in transactions. Moreover, the brighter outlook is not simply limited to the investment side. With unemployment falling (albeit from very elevated levels), occupier demand is rising. Although for Spain and Portugal rents are expected to remain broadly stable in the near term, respondents’ twelve month view suggests that rents will rise as the year progresses. Significantly, in Ireland, both the three and twelve month rental expectations indicators are firmly entrenched in positive territory.
Alongside this, the performance of the UK and Germany remains particularly strong, in keeping with recent results and macro data.
In China, headline activity in the occupier market appears to have turned relatively flat, while progress on the investment side is still seeing a modest uptick. The Hong Kong data shows a continuation of the downward trend established during the early part of last year, as occupier demand slips further and investment enquiries decline, resulting in negative OSI and ISI values.
The results for Russia highlight a sharp decline across both the occupier and investment markets, suggesting confidence has been undermined by geopolitical tensions and the ongoing slowdown in economic activity, with the risk of recession now looming. Likewise, the Brazilian figures continue to deteriorate, with the ISI turning negative while the OSI dropped backed further from last quarter’s already negative reading.
The twelve month indicators suggest little improvement over the year ahead, with rents and capital values expected to decline as moderating growth and higher interest rates take their toll on the real estate market.
RICS Chief Economist Simon Rubinsohn commented: “The Q1 RICS Global Commercial Report Monitor highlights the more widespread sense of optimism in the G7 occupier and investment markets versus the BRICs. At the country level, the best performing markets during Q1 were the UAE and Japan, while the weakest were Brazil and Russia. Significantly, some of the hardest hit countries by the global financial crisis, the Republic of Ireland and Spain, are now seeing a recovery in sentiment.”
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Marketing and Communications Manager
RICS Middle East and North Africa
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