RICS sees pick-up in global commercial mood

Financial Mirror (Cyprus) - - FRONT PAGE -

The lat­est RICS Mon­i­tor shows a pick-up in commercial real es­tate sen­ti­ment across the globe dur­ing the first quar­ter of 2014. In Europe, in­vest­ment sen­ti­ment re­bounded in a num­ber of hard hit euro area mar­kets, while Rus­sia ex­pe­ri­enced a sharp re­ver­sal.

The re­sults for Rus­sia high­light an im­por­tant de­cline across both the oc­cu­pier and in­vest­ment mar­kets, sug­gest­ing con­fi­dence has been un­der­mined by geopo­lit­i­cal ten­sions and the on­go­ing slow­down in eco­nomic ac­tiv­ity, with the risk of re­ces­sion now loom­ing.

Across the Euro area, a de­gree of di­ver­gence ap­pears to be emerg­ing as the re­cov­ery in commercial property gains trac­tion in some mem­ber states, while the progress in oth­ers stalls. Sen­ti­ment re­mains par­tic­u­larly down­beat through­out France and the Nether­lands, de­spite both of these coun­tries for­merly ex­it­ing re­ces­sion dur­ing the lat­ter part of 2013.

By way of con­trast, a sig­nif­i­cant im­prove­ment is now vis­i­ble in Ire­land, Spain and Por­tu­gal. In fact, in­vest­ment trans­ac­tion ex­pec­ta­tions are now higher in these three mar­kets than in any other coun­tries in the sur­vey. Go­ing for­ward, this is an­tic­i­pated to trans­late into a sharp rise in trans­ac­tions.

More­over, the brighter out­look is not sim­ply limited to the in­vest­ment side. With un­em­ploy­ment fall­ing (al­beit from very el­e­vated lev­els), oc­cu­pier de­mand is ris­ing.

Al­though for Spain and Por­tu­gal rents are ex­pected to re­main broadly sta­ble in the near term, re­spon­dents’ twelve month view sug­gests that rents will rise as the year pro­gresses.

Sig­nif­i­cantly, in Ire­land, both the three and twelve month rental ex­pec­ta­tions in­di­ca­tors are firmly en­trenched in pos­i­tive ter­ri­tory. Along­side this, the per­for­mance of the UK and Ger­many re­mains par­tic­u­larly strong, in keep­ing with re­cent re­sults and macro data. The sit­u­a­tion in Cyprus, how­ever, re­mains muted. “The end of Q1 2014, found Cyprus at the one year mark from the de­ci­sions of the Eurogroup on March 15 and 27 to ‘bail-in’ the de­pos­i­tors of two of the largest banks, to close down Laiki Bank, and to im­pose cap­i­tal re­stric­tions,” said Jennifer Petrides, MRICS, Mem­ber of RICS Cyprus said.

“De­spite the slow­down in eco­nomic ac­tiv­ity and the pre­vail­ing eco­nomic con­di­tions, the sen­ti­ment re­mains down­beat with a glim­mer of hope pur­suant to the whis­pers of a pos­si­ble res­o­lu­tion to the po­lit­i­cal prob­lem and the prospects that oil and gas ex­plo­ration can bring to the is­land. Given the eco­nomic con­di­tions, there is a lack of trans­ac­tions by lo­cal buy­ers, whilst there seems to be in­creased in­ter­est from for­eign in­vestors,” she ex­plained.

Ac­cord­ing to the RICS Cyprus Property Price In­dex Q4, 2013, val­ues of re­tail prop­er­ties across Cyprus fell by an aver­age of 3.2%, whilst those of of­fices and ware­houses fell by 1.4% and 0.7% re­spec­tively. Ad­di­tion­ally, on a quar­terly ba­sis rental val­ues de­creased by 3.0% for re­tail units, 1.4% for ware­houses, and 1.6% for of­fices.

Out­side Europe, the UAE and Ja­pan are once again the best per­form­ers of the RICS global re­port, with very pos­i­tive read­ings and healthy rental and cap­i­tal value gains ex­pected dur­ing the course of 2014. Up­beat re­sults were also re­turned from con­trib­u­tors from the US, New Zealand and Sin­ga­pore real es­tate mar­kets.

In China, head­line ac­tiv­ity in the oc­cu­pier mar­ket ap­pears to have turned rel­a­tively flat, while progress on the in­vest­ment side is still see­ing a mod­est uptick.

Fig­ures in Brazil con­tinue to de­te­ri­o­rate, with rents and cap­i­tal val­ues ex­pected to de­cline as mod­er­at­ing growth and higher in­ter­est rates take their toll on the real es­tate mar­ket.

“The Q1 RICS Global Commercial Re­port Mon­i­tor high­lights the more wide­spread sense of op­ti­mism in the G7 oc­cu­pier and in­vest­ment mar­kets ver­sus the BRICs,” said RICS Chief Econ­o­mist, Si­mon Ru­bin­sohn.

“At the coun­try level, the best per­form­ing mar­kets dur­ing Q1 were the UAE and Ja­pan, while the weak­est were Brazil and Rus­sia. Sig­nif­i­cantly, some of the hard­est hit coun­tries by the global fi­nan­cial cri­sis, the Repub­lic of Ire­land and Spain, are now see­ing a re­cov­ery in sen­ti­ment.”

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