Commercial property markets in emerging economies are continuing to outperform those in developed economies, says the RICS Global Property Survey published yesterday (November 2, 2010). More importantly, the survey strongly suggests that this picture is set to continue into the final quarter of the year with a few notable exceptions.
The results of the third quarter survey show that many of the emerging markets that were relatively unscathed by the financial crisis are experiencing faster growth than developed economies such as the UK, euro zone and US. Emerging markets that are performing most strongly, buoyed by the strength of their domestic economies, are China, Hong Kong, Singapore and Brazil.
In terms of occupier markets, agents in around three quarters of countries have reported an increased demand for property over the last quarter. However, only just over one third of countries expect improvements in rental expectations over the next quarter; significantly, most are still anticipating increases in available space. Similarly, in the third quarter, investment activity improved with the vast majority of markets reporting that transactions increased and that the number of bidders rose. Meanwhile, capital values are expected to continue increasing in more than half of the markets monitored in the survey.
RICS Chief Economist Simon Rubinsohn said: "The more heavily indebted countries in Western Europe, Japan and the US face increasing problems with deleveraging and potential new regulation. This is likely to continue to be a drag on their performance for some time to come. Meanwhile, capital flows are likely to be increasingly directed towards real estate opportunities in the emerging world.''
Other key points include:
- The occupier recovery in the UK seems to be stalling as agents reported that tenant demand deteriorated more speedily in the third quarter than in the preceding three month period.
- Sentiment in China appears to be accelerating despite the fact that the Chinese government has tried to suppress the surge in assets prices by tightening lending criteria. Consequently, expected rents and capital values increased at twice the pace seen in the second quarter. Investment activity also increased over the last quarter.
- The survey suggests a rebound in sentiment from property professionals in Germany, as the outlook for capital values improved from 9% in the second quarter to +19% in the third quarter. Rental expectations remain neg