Global commercial real estate outlook

According to a new report published by the Global Commercial Property Survey (RICS) the global commercial real estate markets are beginning to feel the effects of softening economies with the outlook strongest in China, Brazil and Russia and the most negative sentiment in Europe.

Across the countries that were surveyed fewer investment enquiries and development starts were indicated this quarter while available space rose considerably. Additionally a more negative mood colours the global commercial real estate outlook with almost two thirds of countries reporting negative rental and capital value expectations. Nearly two fifths of countries are reporting an expected decline in investment demand.

China, Brazil and Russia remain resilient and, most notably, Japan has seen positive momentum as well as other counties. Despite economic challenges facing the West these countries will most likely continue to outperform which will be reflected in real estate markets.

After a disappointing first half of the year, the market shows signs of turning around in Japan. A considerable and positive swing across all indicators as well as a more optimism about next quarter was reported.

A more restrictive monetary policy and the subsequent slow down in India´s economy appears now to be having some impact on commercial real estate activity and sentiment. Occupier demand moved into negative territory indicating a small fall in the desire to take up space while availability rose. Consequently, rental and capital value expectations moved from positive into negative and expectations for investment activity next quarter have also edged back.  However, almost certain is that the growth of the Indian economy will remain at seven percent, which will provide support for the Indian real estate market.

Remaining high are the rental and capital value expectation in Brazil. Agents continue to be positive in regards to forthcoming investment demands. The report points out that the impact of recent interest rate cuts form the Brazilian Central Bank are yet to take effect on the commercial market, but will support strength on occupier side.

While China´s commercial real estate market is still more robust than most, it lost some momentum this quarter. Tenant demand moderated while available space moved into positive territory again. Investment enquiries remain flat while development starts picked up slightly. Expectations for the next quarter remain positive but the expected growth seems to have slowed.

The commercial real estate market in France reported a faltering with a drop in tenant demand while available space continued to rise.  Expectations for upcoming quarters are pessimistic with capital value pushing further into negative territory.

The German commercial real estate market continues to perform well. Indicators remain positive and agents are optimistic for the fourth quarter of the year.  A relatively robust growth, strong export demand from emerging markets suggests that Germany is best placed in Europe to withstand negative shocks from the ongoing euro area crisis.