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HONG KONG, May 6, 2015 /PRNewswire/ -- The Q1 2015 RICS Global Commercial Property Monitor indicates that the Hong Kong economy faces ongoing headwinds as the impact of the Chinese economic slowdown and the disappointing global recovery continue to cloud the outlook. Consequently, risks to the growth outlook in the first half remain biased to the downside.
The RICS Occupier Sentiment Index (OSI) fell again during the first quarter from -3 to -7. Meanwhile, the RICS Investment Sentiment Index (ISI) remained in broadly neutral territory in Q1, at -1. Tourist spending and retail sales have been weakening. Indeed, the sales of jewellery, watches and luxury items have been on a downward trend. As a result, tenant demand for retail property has been subdued and rental values in the retail sector are expected to continue to face increased downward pressure. In the office and industrial sectors, rents are expected to rise at a strong pace. In the investment market, the supply of property for sale increased across all areas of the market interestingly enough, the prime office market is expected to deliver the strongest gains with prices rising by more than 4% over the next twelve months, while prime retail is forecast to see a 1% fall.
RICS Senior Economist Andy Wu, said: "There is one interesting finding that stands out in the Q1 monitor and is worth highlighting. As an increasing number of retailers slowed down their expansion plans, according to our survey results, demand for retail property space continued to soften in the first quarter. Undoubtedly, the Q1 decline provides further evidence of the fragility of retail sector health. Against the backdrop of a still-challenging retail environment, the retail property market has been going through a period of corrections. Both investor and tenant demand for retail property has wobbled up and down over the past several quarters. Indeed, retail sales have been on a downward trajectory for quite some time due in part to the growing anti-mainland sentiment in the city. We believe this sector will likely experience continuous rises in vacancy rates as a result of subdued space demand until there is a sustained upturn in consumer confidence and retail sales. Consequently, the retail property market will continue to face downward pressures on rents and values for some time to come."
The RICS Global Commercial Property Monitor is a quarterly guide to the trends in the commercial property investment and occupier markets. The forward-looking sentiment indicators generated by the RICS Economics are used to track commercial real estate trends. Full reports are available at rics.org/economics
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'.
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