Rents and capital values are projected to rise the highest in Japan, with the UK and New Zealand close behind, but investor inquiries are growing fast in France, says the RICS
Japan leads expectations of growth in commercial property values and rents, according to a new global survey, but investor inquiries are growing fast in France.
The UK and New Zealand are close behind and, overall, sentiment is strengthening, says the Quarter 3, 2014 Royal Institution of Chartered Surveyors’ (RICS) Global Commercial Property Monitor.
There are improvements in Spain, Portugal, Ireland, and France, which heads the table of rising investor inquiries, although that is yet to feed through to capital value projections, which remain subdued.
There is also momentum in Germany, the United States, United Arab Emirates and Hungary, particularly on the occupier side, with growth in tenant demand.
The emerging BRIC markets show variable performance, with sentiment in India improving, the China market flat, and Russia and Brazil worsening.
Japan posted the highest readings for the Investment Sentiment Index (ISI) and Occupier Sentiment Index (OSI), which extends the run of six quarters of strong results – and future indications are that it is likely to maintain its position over the next 12 months at least, with further growth in capital values and rents anticipated by survey respondents.
Portugal, Spain and Ireland rank highly in terms of growth in occupier demand and investment inquiries, and this is supporting the medium-term outlook for increasing rental returns and capital values.
The weak performance of the Italian and French economies is reflected in the results for the occupier segment, with OSI readings remaining firmly negative, but investment indicators show that after three years of disappointing results, France has seen a material pick up over the past quarter and there are tentative signs of stabilisation in Italy,
Medium-term prospects for India are encouraging, with sizeable gains projected for rents and capital values of around 10% per annum, over the next three years.
Chief Economist, Simon Rubinsohn, says, “Alongside growing optimism about the country’s economic performance these buoyant expectations are being driven by the government’s approval of REITs (announced in the latest budget) with the entire Indian sample stating that funding in the commercial real estate sector should be improved as a result.”
In China, growth in supply is outstripping demand in both the occupier and investment sectors, contributing to a flat near-term outlook for rents and capital values and for the first time since 2009, both OSI and ISI readings been negative for two consecutive quarters.
South Africa demonstrates similar trends to those of China, but investor interest has increased over the past three months.
But sentiment in Russia and Brazil is deteriorating across the board. This has now been an on-going theme in Brazil for the best part of two years with moderating economic growth and higher interest rates taking their toll on the real estate sector.
In Russia, around three quarters of respondents say that sanctions are affecting business with just over half predicting there could be more bad news to come.
RICS Global Commercial Property Monitor is a quarterly guide to the trends in the commercial property investment and occupier markets and the latest survey included more than 1,000 responses from professionals asking to compare conditions over the latest three months with the previous three months.
By Adrian Bishop, Editor, OPP Connect