RICS: No End to Investment Boom in Asia

Investor and occupier markets in mainland China and Hong Kong continue to grow strongly

RICS Global Commercial Property Survey Q1 2011 -- Asia Highlights

HONG KONG, May 16, 2011 /PRNewswire-Asia/ -- Positive sentiment towards real estate is being felt in an increasing number of countries, particularly in Asia, reports the Q1 2011 RICS Global Commercial Property Survey. Asian markets continue to outperform their global counterparts with mainland China, Singapore and Hong Kong leading the way. Property markets in mainland China, Hong Kong and Singapore continue to show bullish across all sectors and stay near the top of the global standings.

Chinese commercial property still performs with strength showing evidence of strong occupier demand and investment appetite from the market.  Despite the measures implemented by the Chinese government -- designed to scale back bank financing, the real estate market in mainland China and Hong Kong continues to heat up. Tenant demand increased at a faster pace in both jurisdictions in Q1 2011, and, looking ahead, rental and capital value expectations remain strongly positive in both markets for Q2 2011.

For mainland China, the respective net balance scores are +76 and +79, while in Hong Kong they stand at +81 for both series.  Given the implications for the global economy should the Chinese property market continue to overheat, it seems likely that further interest rate increases will be sanctioned by the authorities as the year unfolds.

Commenting on the survey, Henry Li, RICS China Chairman, said, "In the macro economy, the past four months of 2011 saw interest rates increase in China, Thailand, The Philippines, Malaysia, India and Vietnam as national inflation grew across emerging Asia. Speculation is building that a number of other central banks may follow suit. In China, qualitative measures have been introduced, including higher bank reserve requirements and lending restrictions. As a result many smaller developers are expected to look into new ways of financing and even joint collaboration with foreign investors. Commercial properties are benefiting most."  

Tight supply of office space is still evident in Hong Kong where the net balance of available property has fallen from -31 to -57 and thus sees the fall in use of inducements, with the net balance dropped from 0 to -30.

Commenting on the survey, Nigel Smith, RICS Hong Kong Commercial Property Professional Group Committee Chairman, said, "Rents for prime Central offices appear to have reached a plateau over the past several months, and remain at a discount to the prior market peak of mid-2008, as occupiers question the viability of maintaining offices in the CBD given the current high level of rental occupation. Given the lack of major new supply this year in core office districts, growth in decentralized office rents will likely pick up pace as occupiers seek out expansion space in more cost effective locations."

Turning to the investment market, investors are still upbeat with the commercial property in Singapore and China in spite of tightening policy measures in bank lending.  Respondents to the survey from all four key countries indicated that both investment activity and number of bidders per property continued to increase in Q.1.  Though Singapore and Malaysia's investment activity have been edged down slightly from +59 to +39, a firm support is still evident.

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 first quarter of 2011 based on information collected from leading international real estate organisations, local firms and other property professionals.

Other Global Key Findings

Serial woes for peripheral Europe**

Despite the government bailouts peppering peripheral Europe, these countries remain in the grip of sovereign debt crises and their real estate markets remain fragile. While rental expectations for Q2 2011 moderated, they remain in negative territory, as do capital value expectations. Greece and Ireland sit firmly at the bottom of the table for both these forward-looking indicators while Portugal and Spain continue to produce weak readings. The challenges facing real estate in these countries is now being heightened by the recent decision of the ECB (European Central Bank) to start tightening monetary policy in the euro area. As a result, many expect further interest hikes over the balance of 2011; an expectation that helps to explain the caution expressed by respondents from these countries to the survey. As a result, many expect further interest hikes over the balance of 2011; an expectation that helps to explain the caution expressed by respondents from these countries to the survey.

US optimism grows

Likely reflecting the impact on the economy of President Obama's 2010 federal spending programmes and the monetary boost from the US Federal Reserve, the results of this quarter's survey show continued improvement in the US commercial property market; an improvement first noted in Q4 2010. The net balance score for tenant demand remained in positive territory for Q1 2011, while transaction numbers and the number of bidders per property also rose. Most significantly, for the first time since 2008, agents report a positive net balance score when it comes to rental expectations for Q2 2011. Taken in conjunction with the net balance score for capital value expectations of +12, it is clear that agents are feeling more optimistic about the forthcoming quarter for commercial property in this country. 

Notes to Editors:

** Peripheral Europe: Greece, the Republic of Ireland, Portugal and Spain.

Respondents were asked to compare conditions in Q4 2010 to conditions in Q1 2011. Responses for this survey were collected until 31 March 2011 and amalgamated, at a country level, across the three real estate sub-sectors of offices, retail and industrial property to form diffusion indices for the commercial market as a whole.

About RICS & RICS Asia

RICS is the world's leading qualification when it comes to professional standards in land, property and construction.

In a world where more and more people, governments, banks and commercial organisations demand greater certainty of professional standards and ethics, attaining RICS status is the recognised mark of property professionalism.

Over 100 000 property professionals working in the major established and emerging economies of the world have already recognised the importance of securing RICS status by becoming members.

RICS is an independent professional body originally established in the UK by Royal Charter. Since 1868, RICS has been committed to setting and upholding the highest standards of excellence and integrity -- providing impartial, authoritative advice on key issues affecting businesses and society. RICS is a regulator of both its individual members and firms enabling it to maintain the highest standards and providing the basis for unparalleled client confidence in the sector.

The RICS Asia supports a network of over 11,000 individual professionals across the Asia Pacific region with an objective to help develop the property and construction markets in these countries, by introducing professional standards, best practice and international experience. It promotes RICS and its members as the natural advisors on all property matters. It also ensures that services and career development opportunities are provided to members.

The RICS Asia region covers national associations and local groups locating in Brunei, Malaysia, Singapore, Thailand, The People's Republic of China and the SAR Hong Kong. It also has members working across the region such as Bangladesh, Bhutan, Burma/Myanmar, Cambodia, Indonesia, Japan, Kiribati, Laos PDR, Macao, Mongolia, Nepal, North Korea, South Korea, Taiwan, The Maldives, The Philippines, Timor East and Vietnam. For more information, please visit: www.ricsasia.org.

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