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Rental expectations continue to rise in HK
HONG KONG, Aug. 8, 2013 /PRNewswire/ -- The Q2 RICS Global Commercial Property Survey shows that the occupier market in HK ended the quarter on a slightly stronger footing, with the RICS Occupier Sentiment Index (OSI) indicator edging up in Q2. As sentiment improved on the occupier side and available space shifted down, it is not surprising that rental expectations among respondents have continued to rise. Occupier demand picked up this quarter with net balance moving from +6 to +21, and inventory declined significantly, falling from +25 to -6. On the investor side, investor enquiries have changed little although transactions are still expected to decline, with the net balance picking up from -10 to -3. The forward-looking indicator for investment activity continues to look subdued.
Occupier market softens, while investment market is still quite positive in China
The Survey shows that the weaker economic backdrop appears to be weighing down on confidence among occupiers in China. Although still positive, the lettings market softened this quarter with the OSI easing notably. Meanwhile, the investment market continues to hold up with the RICS Investment Sentiment Index (ISI) indicating the mood among investors remains positive. Both buyer enquiries and expectations of future transaction activity recorded positive net balances. The number of distressed properties coming to the market is expected to continue to pick up in the third quarter. Meanwhile, the demand for distressed property rose more modestly in Q2.
Japan market remains positive, mainly driven by improving economic conditions
In Japan, the occupier market has been supported by better prospects for the economy and a brighter mood among businesses and consumers. Indeed, the OSI recorded a solid reading of +26 in Q2. Significantly, occupier demand stood at a net balance of +51, a level consistent with strong demand for commercial space. Rental expectations continue to rise at a similar pace to Q1. The investment market remains in a strong state, and transactions are expected to continue to pick up strongly in the coming quarter.
Singapore shows signs of stabilisation
In Singapore, the occupier demand returned to positive territory in Q2, but remains below the rise in available space. Underpinned by this, rental values are expected to edge back into positive territory next quarter. It is still too early, however, to determine if this is the start of a rising trend. The investor market remains buoyant due to investor demand and expected transactions increasing. Investment enquiries remained positive in Q2, with the net balance rising from +15 to +17.
RICS Senior Economist Andy Wu, said: "In Asia, it was a quarter of greater uncertainty, with concerns over the slowing Chinese economy, the overall strength of the US recovery, and regional political risks affecting sentiment in the commercial property market. The slowing growth in the region suggests occupier demand will likely continue to soften in some parts of Asia.
Undoubtedly, the commercial property investment market in the majority of Asian markets has benefited greatly from abundant global liquidity over the past few years. The possibility of a change in the Fed's monetary policy could potentially create anxiety amongst property investors. While the fundamental picture may still be relatively robust in Asia, with funding costs rising and global liquidity reducing later this year, this will likely put a damper on commercial real estate activity in the coming few quarters. Having said that, we believe Japan should sail through this turmoil period relativelyunscratched against the backdrop of improving economicfundamentalsand strengthening confidence."
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 the Survey: Available at www.rics.org/economics, the RICS Global Commercial Property Survey is a quarterly guide to developing trends in the commercial property investment and occupier market.
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