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| Global real estate markets begin to feel effects of softening economy The global real estate market has begun to feel the effects of the softer macro economic environment, finds the Q3 2011 RICS Global Commercial Property Survey. According to the report, more countries indicated fewer investment enquiries and development starts this quarter than in Q2 2011, while available space rose considerably across the countries surveyed. In addition, negative sentiment colours the global outlook for Q4 2011 with almost two-thirds of countries reporting negative rental and capital value expectations and nearly two-fifths reporting an expected decline in investment demand. The RICS Global Commercial Property Survey is a quarterly guide to the developing trends in commercial property investment and occupier markets around the world. Providing a snapshot of sentiment, the current edition details market conditions for the third quarter of 2011 based on information collected from leading international real estate organisations, local firms and other property professionals. While certainly not heartening, it is also not especially surprising that this quarter's survey results reflect the impact of today's softer macro-economic picture. The global real estate market flourishes when economic conditions are stable and strong. At the moment we are dealing not only with considerable levels of uncertainty in financial markets around the world, but also an intensification of the euro area crisis and the threat of a recession in the US . Confidence has definitely taken a knock. That said, there remain key areas of resilience – China, Brazil and Russia – and we have seen positive momentum in several other countries as well, Japan most notably. Although we doubt that the developing economies can completely insulate themselves from the challenges facing the West, our suspicion is they will continue to outperform and this will be reflected in real estate markets." Market shows signs of turning around in Japan after disappointing first half Survey results point to an improvement in sentiment in Q3 2011 for the commercial property market in Japan after a number of quarters of weak readings. Respondents reported considerable and positive swings across all indicators. Net balance scores for occupier demand rose from -9 to +30, scores for investment enquiries rose from -9 to +39 and development starts scores rose from -11 to +10, quarter over quarter. At the same time, the rate of available space slowed. Most significantly, however, agents in Japan are feeling a little more optimistic about next quarter. Rental and capital value expectations were positive for the first time in over three years; the net balance scores improving to +7 and +12 respectively. India 's momentum slackens a little India 's more restrictive monetary policy and the subsequent slow down in its economy appears now to be having some impact on commercial real estate activity and sentiment. For the first time since 2009, occupier demand moved into negative territory pointing to a small fall in the desire to take up space while availability rose. Consequently, rental and capital value expectations both moved from positive into negative territory. This does however follow five and eight quarters of positive readings, respectively. At the same time, expectations for investment activity next quarter have also edged back. However, the likelihood is that growth in the Indian economy will still remain at in excess of seven percent, which should provide a layer of support for the real estate sector. Other Regional Highlights Brazil According to the survey, Q4 2011 rental and capital value expectations remain high in Brazil, furthering a trend that began at the back end of 2009. Agents also continue to be positive regarding forthcoming investment demand, although slightly less positive than last quarter. In terms of Q3 2011, respondents report a continued positive trend in occupier demand and development starts although available space did edge up slightly. The impact of recent interest rate cuts from the Banco Central do Brasil (Brazilian central bank) are yet to take effect on the commercial market, but will further support strength on the occupier side. China While still more robust than most, China 's commercial property market lost some momentum this quarter. The pace of tenant demand moderated somewhat while available space once again moved into positive territory. That said, rising occupier demand still continues to far outstrip rising supply. Investment enquiries this quarter remained relatively flat while development starts picked up the pace only slightly. Looking ahead, expectations for next quarter remain strongly positive, but the pace of expected growth seems to have slowed. Rental expectations eased from +73 to +65, capital value expectations from +71 to +56 and investment demand expectations from +42 to +36, quarter over quarter. Given the recent news flow regarding Chinese developers, coupled with the less accommodating policy environment, we would expect activity to show further signs of stabilising. France Agents in France reported a faltering in the commercial property market this quarter after the steadier performance seen in Q2 2011. Q3 2011 showed a sharp drop in tenant demand (from +22 to -30) while available space continued to rise, and at a faster pace. At the same time, the investment enquiries picture changed dramatically, moving from a net balance score of +20 to -17, quarter over quarter. Respondents seem relatively pessimistic for the upcoming quarter as well with capital value expectations pushing further into negative territory (-12) and being joined by both rental expectations and expected investor demand (-21 and -13, respectively). With the euro crisis continuing, and the prospect of a Greek default damaging French banks' balance sheets, we expect conditions to continue flat-lining for the remainder of the year. Germany The commercial real estate market in Germany continues to perform relatively well despite the growing woes of its near neighbours. Indicators across the board remained positive for Q3, although most posted a marginal moderation in pace. Similarly, agents continue to be optimistic for Q4, but slightly less so than last quarter. Expectations of rental and capital growth both posted net balance scores of +19, while a slight rise in the pace of investment demand is expected. Relatively robust growth, largely aided by strong export demand from emerging markets suggests that this country is best placed in Europe to withstand negative shocks resulting from the ongoing euro area crisis. Russia While sentiment in Russia does remain largely positive, agents report it is now a little less so than in previous quarters. Availability contracted even further in Q3 2011, but the pace of rising occupier demand and development starts slowed considerably, from +69 and +44 in Q2 to +35 and +17 in Q3, respectively. That said, rental and capital value expectations continue to remain positive, as does expected investment demand, albeit at slightly lower levels. Significantly, the recent decision by the central bank to lower interest rates suggests that any downturn in the economy will be relatively modest. UK This quarter’s survey shows that the UK commercial property market is experiencing increasing weakness. Occupier demand fell back into negative territory while the pace of available space picked up slightly. Development starts remained negative as well, becoming slightly more so this quarter while investment enquiries are broadly flat. Looking ahead, agents seem fairly pessimistic about next quarter, registering expectations for a drop in investment demand, and a further deterioration in rental and capital value expectations. A notable development this quarter is that the occupier market in London seems to be losing some momentum in response to the broader economic backdrop. At the all-property level, net balance results for rental expectations and tenant demand turned negative. US The tentative US recovery of the last two quarters seems to have stalled in Q3 2011, which may in part the increasing uncertainty hanging over the American economy. Occupier demand continues to rise, but at a slower pace than seen previously. Development starts this quarter became more negative while investment enquiries remained largely flat. Looking ahead, agents report little change expected in capital value while the picture for rental growth remains negative (although slightly less so than previously). One piece of good news for the real estate market in this country; investment demand is expected to remain positive. write your comments about the article :: © 2011 Construction News :: home page |