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HONG KONG, Jan. 30, 2015 /PRNewswire/ -- RICS (Royal Institution of Chartered Surveyors) recently published the Q4 2014 RICS Global Commercial Property Monitor. The report indicated that while in Hong Kong key economic indicators continue to point to a softening in the economy, economic growth is likely to pick up at a steady pace this year.
In Hong Kong, the RICS Occupier Sentiment Index (OSI) fell slightly over the quarter from +4 to -3, while the RICS Investment Sentiment Index (ISI) remained in negative territory in Q4, recording a value of -3. Tenant demand continued to increase in both office and industrial sectors, but a sharp decline was reported in retail. Over the next three months, rents are expected to grow in the office and industrial sectors, but fall in the retail arena. It is worth highlighting that on the investment front, the supply of commercial property for sale grew across each sector with retail units registering the steepest increase. Finally, over the next twelve months, the capital value of prime office space is expected to grow by 4%. Prime industrial space is expected to grow by 3%. No growth in capital value is predicted for prime retail space.
In China, moderation in economic growth continues to weigh on overall commercial property sentiment. Moderate occupier demand and growing available space have pushed the headline rental value expectations into negative territory. In Singapore, sentiment in the investment market weakens. Furthermore, strong rental growth is expected in the office sector over the coming three months, but rents are expected to decline for industrial and retail sectors. In Japan, the near term outlook is still robust despite significant economic headwinds. Tightening market conditions continue to place upward pressure on rents, which are anticipated to rise strongly across the board at both the three and twelve month horizons.
RICS Senior Economist Andy Wu, said: "We believe Hong Kong remains in a weaker position when compared to other Asian markets, with the growing uncertainty of the political situation and the lack of growth in the economy likely causing an unstained level of occupier activity and smaller scale flows of capital into the city this year. Values are faltering as a result of occupiers and investors being cautious over market prospects. As such, the RICS Q4's overall property performance isn't surprising. Indeed, sentiment has been soft in line with its underlying economic fundamentals, and whilst it is important to focus on the wider market, it is worth highlighting that certain sub-sectors still remain downbeat, namely retail. The Q4 decline provides further evidence of the fragility of retail sector health and we believe this will continue until there is a sustained upturn in consumer spending growth. Turning to Singapore, pretty much the same could be said of occupier and investor markets, with commercial property performing unsatisfactorily.
As the economic challenges in China continue throughout rest of the year, it is likely to see a more pronounced divergence in the performance of commercial property markets between Tier 1 and lower-tier cities. Indeed, the economic slowdown has continued to hold back occupier activity, resulting in static rental values. Interestingly enough, SMEs and larger firms have continued to exercise a cautious approach to take space. They have attempted to minimise risk and cost through delaying the expansion or looking to downsize space. This reluctance to commit to new space has weighed on activity and left a growing quantity of stock in many of the Chinese cities.
Q4 has continued to see positive performance in Japan. In fact, this positive trend in the commercial property sector is inconsistent with what is also being reported in the economy generally, through business surveys and other key economic data. While the levels of uncertainty surrounding the economic outlook remain, this has not prevented investors purchasing in Japan's largest cities, namely Tokyo and Osaka. What remains to be seen is whether Japanese commercial property market can continue to fare well, with a growing sense of pessimism for the economy."
The Global Commercial Property Monitor data is a good lead indicator of hard data. This has been the case in many key markets in which RICS has been able to explore the relationship between the RICS time series and other sources of data.
Notes to Editors:
RICS Occupier Sentiment Index (OSI): OSI is constructed by taking an unweighted average of readings for three series relating to the occupier market measured on a net balance basis; occupier demand, the level of inducements and rent expectations.
RICS Investment Sentiment Index (ISI): ISI is constructed by taking an unweighted average of readings for three series relating to the investment market measured on a net balance basis; investment enquiries, capital value expectations and the supply of distressed properties.
Net Balances: Net balance percents, or scores, are calculated by subtracting the numbers of respondents reporting 'down' from the number who reported 'up'.
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.
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About RICS Asia
RICS Asia supports a network of over 20,000 individual professionals across the Asia 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 Asia region serves local member associations locating 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.ricsasia.org.
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