Weak intra-regional trade, sluggish global economic growth and low commodity prices have battered confidence in the commercial real estate sector. According to the Q2 2016 RICS Global Commercial Property Monitor, India and Japan are the only two markets in Asia-Pacific in which both the occupier and investment index readings are in positive territory, suggesting a general downbeat mood in the market.
The Winners
India: The future looks rosy
In India, both Investment and Occupier Sentiment Indices – composite indicators encompassing demand, supply and expectations – improved during Q2 2016. In fact, each measure recorded its highest reading since 2011, though these improvements have been gradual.
The pace at which commercial property supply is rising has eased noticeably over the past twelve months. Against this backdrop, capital value and rental projections are pointing to substantial near-term gains, and the future is rosy. Over the next three years, surveyors expect growth to accelerate across all areas of the market.
Is the peak over for Japan?
Previously robust momentum appears to be fading fast in Japan. Between 2013 and 2015, the Japanese market experienced a period of sharp growth in investor demand, consistently outperforming most global markets during this period.
In Q2 2016, investment enquiries failed to increase for the first time since 2011, with 70% of contributors believing the market has peaked. An exceptionally tight supply should, however, support capital values in the near term as price expectations remain broadly flat over the next twelve months.
The Neutral Party
A flat outlook for Australia
The commercial property market in Australia remains relatively subdued. While occupier demand is broadly stable, availability continues to rise, depressing rental expectations. Meanwhile, investment enquiries increased only marginally according to the latest results. Capital value expectations now point to a flat twelve-month outlook for prime sectors and a negative trend across secondary markets.
The Losers
Singapore commercial property market set to plummet further
The Singapore commercial property market is headed for further decline, with chartered surveyors predicting rents contracting in the next 12 months. Sluggish GDP growth and weak performance in the services sector continues to weigh on occupier demand. In response, landlords are increasing incentive packages to lure tenants – though this is expected to have little effect on demand.
Investor demand fell for the fourth consecutive quarter despite improvements in credit conditions compared to Q1 2016. Only the office sector witnessed a rise in interest from potential buyers, though overall expectations remain gloom-ridden.
Oversupply dampens outlook in China
Having shown tentative signs of stabilising in Q1, both the Investment and Occupier Sentiment Indices turned negative once more in China.
Availability of leasable space rose at the sharpest quarterly pace since 2009, while occupier demand fell – albeit slightly – across all sectors. Excess supply continues to dampen the outlook for rents and capital values, with respondents expecting both to fall significantly across secondary locations. However, prime market segments are likely to prove more resilient.
Demand falls for fourth consecutive quarter in Hong Kong
In Hong Kong, slow economic growth weighs on the outlook for rents and capital values. Retail volume has continuously dropped for several quarters and rent will likely remain flat for the next year.
While prime office values and rents are anticipated to hold steady, secondary units are likely to post modest declines on an annual basis.
Commenting on the quarterly sentiment survey, RICS Senior Vice President Chris Brooke FRICS said, “The feedback provided by chartered surveyors from throughout the Asia Pacific region clearly indicates overall market sentiment in the investment sector remains cautious.”
“The survey results also support anecdotal evidence of increased interest and activity in India. While Australia and Japan remain a key focus for many investors, opportunities in these markets may be more limited in the future. This suggests investors may need to consider deploying capital in a broader range of geographical markets and real estate sectors throughout Asia Pacific to generate acceptable returns.”
About the RICS Global Commercial Property Monitor
The Global Commercial Property Monitor is a quarterly market sentiment survey. All survey respondents are commercial real estate market practitioners. The sentiment index introduced by the RICS economic department allows us to track the trend of commercial property. The full RICS report can be downloaded from www.rics.org/economics
About RICS
Confidence through Professional Standards
RICS promotes and enforces the highest professional qualifications and standards in the development and management of land, real estate, construction and infrastructure. Our name promises the consistent delivery of standards – bringing confidence to the markets we serve.
We accredit 118,000 professionals and any individual or firm registered with RICS is subject to our quality assurance. Their expertise covers property, asset valuation, real estate management; the development of infrastructure; and the management of natural resources, such as mining, farms and woodland. From environmental assessments and building controls to negotiating land rights in an emerging economy; if our members are involved the same professional standards and ethics apply.
We believe that standards underpin effective markets. With up to seventy per cent of the world’s wealth bound up in land and real estate, our sector is vital to economic development, helping to support stable, sustainable investment and growth around the globe.
With offices covering the major political and financial centres of the world, our market presence means we are ideally placed to influence policy and embed professional standards. We work at a cross-governmental level, delivering international standards that will support a safe and vibrant marketplace in land, real estate, construction and infrastructure, for the benefit of all.
We are proud of our reputation and work hard to protect it, so clients who work with an RICS professional can have confidence in the quality and ethics of the services they receive.
About RICS in Asia
RICS in Asia supports a network of over 20,000 individual professionals across the region with an objective to help develop the land, property and construction markets in these countries, by introducing professional standards, best practice education and training. We promote RICS and our members as the natural advisors on all property matters. We also ensure that services and career development opportunities are provided to members.
RICS in Asia region serves local member associations located in Brunei, Japan, Malaysia, Singapore, Thailand, The People’s Republic of China, Hong Kong SAR, Taiwan and South Korea. It also has members working across the region such as Bangladesh, Bhutan, Burma/Myanmar, Cambodia, Indonesia, Kiribati, Laos PDR, Macao SAR, Mongolia, Nepal, North Korea, The Maldives, The Philippines, Timor East and Vietnam. For more information, please visit: www.rics.org.
Contacts
RICS
Danielle Yong, 9128-1477
Communications Consultant
[email protected]
