RICS Global Commercial Property Monitor Q4 2013
Real estate markets around the world are showing more encouraging signals as a result of a generally improving macro climate, says the latest RICS Global Commercial Property Market Monitor.
Positive indicators for growth are increasingly evident across the real estate sector with results pointing to a slightly faster improvement in retail real estate compared with office and industrial.
At the forefront of these trends are the UAE and Japanese real estate markets where the Occupier Sentiment Index (OSI)* and the Investment Sentiment Index (ISI)** are firmly entrenched in positive territory. Significantly, twelve month forward expectations for rents and capital values in both countries are turning progressively upbeat reflecting the expectation that the economic recovery, now underway will continue to gather pace.
Other markets posting a firmer trend in both occupier and investor sentiment include the US, New Zealand, South Africa, Russia and China. The healthy results from the US suggest that there is little immediate fear that Federal Reserve’s decision to begin scaling back the quantitative easing programme will have a great deal of impact on the real estate market. By way of contrast, results for Brazil indicate that the deteriorating economic picture is taking its toll on the real estate market. This is, predictably, most visible in the occupier segment where tenant demand continues to soften and rental expectations are weakening. Although investment activity appears to have stabilised more recently, the suspicion amongst contributors to the survey is that the sector remains vulnerable and, over the next twelve months, capital values are more likely to fall than rise.
Across Asia, results are providing mixed messages. Figures from Singapore paint a picture of an improving market with tenant demand and rent expectations rising for the third consecutive quarter after a difficult period and investment enquiries continuing to pick-up. In comparison, data for Hong Kong remains generally downbeat, with a flat trend in the occupier segment and a greater level of concern amongst investors in view of recent government measures to cool the market. European respondents, although acknowledging some signs of the market ‘bottoming out’, remain the most cautious in the global market on both the current picture and future prospects.
Sentiment indices remain in negative territory for Greece, the Netherlands and Italy, with Switzerland also recording more downbeat results in the fourth quarter. In addition, the OSI* in France is still weak with the twelve month projection for rents indicating little material improvement is anticipated over the course of 2014. However, investors are beginning to show some interest in markets where the downward adjustment has restored some measure of value. This is reflected in more positive ISI** readings for Spain and Portugal; in both cases capital values are projected to rise over the next twelve months. Meanwhile, the strongest European performers are likely to continue to be Germany and the UK, where confidence is improving in both the occupier and investment markets and the forward looking indicators provide little reason for expecting this trend to reverse.
RICS Chief Economist, Simon Rubinsohn, said, “The improving tone to the global economy is not without its challenges but the lessening of downside risk is, more than anything, helping to support commercial real estate markets. The recovery in sentiment in Japan and the UAE continues to gain momentum but the more positive mindset is spreading. A key issue is how the tapering of the US Federal Reserve’s quantitative easing programme plays out. Our suspicion is that the more solid macro support in much of the world will help underpin markets but it would be foolish not to anticipate some volatility as monetary policy becomes somewhat less accommodating.”
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