The Q2 RICS Global Commercial Property Survey suggests that the occupier market in the U.S. is continuing its gentle recovery, but this isn’t yet filtering through to rental values. Meanwhile, the South American market continues to demonstrate relative strength in the occupier market, underpinned by falling levels of available space.
Most commercial property markets around the world remain robust, in spite of the recent economic ‘soft patch’, finds the Q2 2011 RICS Global Commercial Property Survey. The report indicates that the majority of countries surveyed witnessed positive growth in occupier and investment demand, as well as in development starts during Q2 2011 despite further increases in energy costs. In addition, the survey paints an optimistic picture for the next quarter, with the majority of countries reporting positive rental and capital value expectations and more than three quarters of respondents also expecting investment demand to grow.
“We would have expected our survey results to reflect some impact of the recent economic ‘soft patch’, but interestingly, it looks as though commercial property markets around the world remain strong, regardless. China, in particular, has proven remarkably resilient in the face of the introduction of a series of measures designed to cool the market. Capital value and rental expectations remain buoyant in much of the world indicating a continuing level of optimism. That said, the tentative recovery in the US, visible in the previous set of results, already appears to be faltering and it is noticeable that the momentum in the Indian real estate market seems to be slackening,” said Simon Rubinsohn, RICS Chief Economist.
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 second quarter of 2011 based on information collected from leading international real estate organizations, local firms and other property professionals.
Key Regional Highlights
The survey suggests that the U.S. real estate recovery may have run out of steam in the second quarter as the wider economy also suffered a setback. Rental expectations, which had turned positive in Q1, moved back into negative territory (to -11 from +5), though the office sector is looking marginally stronger than retail and industrial. The increase in available property has also slowed in the retail sector and actually turned negative for industrial property. The headline net balance dropped back to +5 from +10.
Meanwhile, the results from the investment side of the market appear to be holding up better with demand still rising, albeit a little more modestly than previously, and capital value expectations are edging upwards.
Net Balances: Net balance percents or scores are calculated by subtracting the number of respondents reporting ‘down’ from the number who reported ‘up’.
Strong investor demand has been evident in the Canadian market for several quarters, but the pace of increases eased in Q2 as the net balance dropped back from +93 to +30. Capital value expectations remain upbeat with 38 per cent more respondents expecting a rise over the next quarter. The Canadian market is supported by strong economic foundations, with economic growth expected to improve and unemployment to fall back over the rest of 2011. This is consistent with continued growth in occupier demand – it leapt up to +62 in Q2 (from +37) – and optimistic rental expectations. The rental expectations net balance (for the coming quarter) jumped to +31, the highest reading since Q2 2008.
Despite recent actions taken by the Banco Central do Brasil to control rising inflation, agents report that the mood in the commercial property market remains upbeat in this country. The rate of growth in tenant demand picked up considerably in Q2 2011, with net balance scores moving from +38 to +79. Meanwhile, available space actually fell back this quarter (-33). Not surprisingly, agents also report a strong development pipeline; development starts posted a highly positive net balance score of +61, up from +13 in Q1 2011. Looking ahead, agents remain optimistic regarding rental and capital value expectations for Q3 2011, continuing a trend that began in late 2009.