HONG KONG, July 30, 2014 /PRNewswire/ — The Royal Institution of Chartered Surveyors (RICS) recently published the Q2 2014 RICS Global Commercial Property Monitor, showing that Occupier Sentiment Index (OSI) for Hong Kong’s commercial property market remains negative for the fourth consecutive quarter. Occupier demand continued to fall with the retail segment losing significant momentum, while office and industrial occupier demand remains stable. As a consequence of falling tenant demand and rising supply, rent value expectations at the three month time horizon were turning more negative. Investment sentiment, as reflected by the Investment Sentiment Index (ISI), remained in negative territory in Q2. With the recent retail sales and exports data surprising on the downside, GDP growth in Hong Kong has been disappointing. Indeed, the risks to the growth outlook remain ever present. RICS believes the growth trajectory is likely to continue to be bumpy in the second half as the global recovery will probably remain tepid. This will undoubtedly weigh on the commercial property sector.
Recent data indicates the short-term economic outlook for Singapore continues to to be relatively sluggish. Although the OSI remains in positive territory, it declined in Q2. Similarly, the ISI edged down over the quarter. Meanwhile, China is not looking particularly favourable, with the OSI and ISI falling into negative territory for the first time since 2009. By way of contrast, Malaysia’s OSI increased notably since Q1, climbing firmly into positive territory. In addition, the ISI also turned positive, for the first time since mid-2013, partly driven by domestic demand and growth in export according to the RICS. Furthermore, the OSI and ISI in Japan continued their upward trend, with both indicators posting another strong reading and remaining positive for the 12th consecutive quarter.
Turning attention elsewhere, the US results show an improvement on an already solid picture with growth in tenant demand, supported by a strengthening labour market, exerting upward pressure on rents. Likewise, respondents to the survey continue to post strong underlying results within the New Zealand, German and UK markets, with the buoyant OSI and ISI figures indicative of high confidence levels.
RICS Senior Economist Andy Wu, said: “In Hong Kong, rents in the central business district continued to struggle to show any significant growth in the second quarter, given a lacklustre employment market in the financial services sector and rising levels of available rental stock in the decentralized business districts. Our survey results also indicate that investors are still somewhat hesitant towards making a commitment in the commercial property and we expect the trend to continue for the time being.
The biggest threat to China, other than headwinds from a recurrence of tighter credit conditions, is the seemingly oversupply of offices and retail space which will put a strain on current rental values and prices during a period of fading interest from businesses and investors. We believe investment levels and transaction volumes will likely continue to be depressed through the reminder of the year. Nevertheless, acceleration of government reforms and measures aimed at stimulating the economy should offset some of the adverse market forces.
Interestingly economic optimism, thought gently fading, has continued to trigger strong demand for property space in Japan. It’s clear both foreign and domestic investors still see the value of Japanese commercial real estate and remain particularly enamored with the office, retail and industrial sectors. We believe this upward trend will unlikely reverse itself anytime soon and investment numbers will continue to uptick for some time to come.
Finally in Singapore, there are signs that economic uncertainty is starting to affect the commercial property sector. We believe in the short term real estate activity will remain relatively depressed due to ongoing economic challenges. That said, the fundamentals of the city state’s real estate market still look positive for the medium to long term as Singapore could continue to emerge stronger through a high level of transparency and a business-friendly set of policies.”
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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