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HONG KONG, Nov. 11, 2013 /PRNewswire/ -- The Q3 RICS Global Commercial Property Survey -- indicates that Hong Kong commercial property market showed signs of deterioration while Japan continued to outperform its Asian counterparts including mainland China, Hong Kong and Singapore.
Occupier and investment sentiment in Hong Kong turns negative in Q3
In Hong Kong, the RICS Occupier Sentiment Index (OSI) edged into negative territory, mainly driven by a sizeable decrease in occupier demand. Meanwhile, availability also ticked up, despite rising availability and declining tenant demand, rental values are expected to remain positive but the net balance moderates notably. On the investor side, the RICS Investment Sentiment Index (ISI) moved back into negative territory with weakness spread across retail, industrial, and office sectors. Capital values are expected to decrease in Q4 according to survey respondents. Survey results suggest there may be a pickup in foreclosed sales in the coming quarter, which may put further pressure on capital values.
Japan continues to outperform other key Asian markets
Japan has posted the strongest tenant demand and rental expectation numbers since the 2008-2009 Great Recession. Growth in development starts has been accelerating possibly in response to strong tenant demand. According to the RICS ISI, the investor market appears to have gained further momentum, with strong increases in enquiries and transactions. Consequently, this is translating into stronger expectations for capital value growth. In keeping with the improved economic outlook, the level of distressed assets coming to market is likely to edge lower in the coming months.
Singaporean market remains stable
In Singapore, rents are expected to pick up in the near term but growth may be contained due to rising available space. Indeed, availability has been rising steadily over the last couple of years and is likely to continue rising given the new development trend. In the investment market, enquires are rising but capital values and investment transactions are expected to remain stable in the near term.
RICS Senior Economist Andy Wu, said: "Most underlying real estate markets in Asian economies experienced modest tenant demand last quarter while the market in Japan continued to show much higher levels of demand and activities. Interestingly, Japan appears to be Asia's shining light. In fact, the strength of the leasing market was a key feature of the quarter in Japan as the economy demonstrated steady improvement. Consequently, strong occupier demand has pushed rents notably upwards over the past few quarters in the major cities of Japan, especially Tokyo, and we believe rental growth is expected to continue in the coming few quarters. Meanwhile, there has been a strong revival of investor confidence, resulting in a welcomed return to investment activity. In the near term, investors should invest heavily in commercial property amid confidence that the economy continues to gain traction. On the other hand, Hong Kong has seen the largest reversals over the last few quarters. Indeed, there has been a shift in sentiment in the commercial real estate market, with market participants much more pessimistic now than at the start of the year. Furthermore, in key markets such as the commercial real estates in HK and Singapore, with transaction activities expected to remain slow, capital and rental values will likely remain stable for the next few quarters."
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 http://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.
