Global commercial rents have fallen dramatically around the world, and the future looks grim for commercial real estate investors. While the markets in Hong Kong and UK are showing signs of improvement, other markets like the US are facing continued declining rents. For more on this see this article from Property Wire.
Discounts and incentives are proving to be insufficient in boosting commercial property rents around the world, according to a new survey.
Across the globe rents are plummeting and the outlook is pessimistic despite some economic improvement and a slowing in the pace of decline in capital values, says the Global Property Survey from the Royal Institution of Chartered Surveyors.
Indeed the report records the sharpest decline in global commercial property rents in the survey’s five year history. Singapore, Ukraine, Spain and Ireland are the worst affected while Hong Kong is the only market showing signs of improvement.
Surveyor sentiment in Spain and Ireland remained depressed with 97% in both countries reporting a fall than a rise in rents. Surveyors in Singapore and the Ukraine were unanimous that rents have fallen with the net balances in both countries reaching 100%.
Even continuing attempts by agents to offer more attractive inducements, the market sector is in the doldrums. Chartered surveyors in Italy, Spain and Ireland remain particularly downbeat about the outlook for rents while 97% of surveyors in both Ireland and Spain expect rents to continue to fall rather than rise over the next quarter while those in Croatia and Singapore are unanimous that rents will fall.
The decline in capital values eased during the second quarter driven by more modest falls in some emerging markets, most notably China and India. But it is Hong Kong where the market is actually recovering with 57% more chartered surveyors reported a rise than a fall in capital values up from a negative balance of 81%.
More generally, expectations for further price rises remain bleak with the US presenting the gloomiest picture.
While transaction activity continued to drop in most world markets, a few countries saw an increase in investment bidders per property. The UK was particularly notable in this regard reporting a positive balance of 46% more chartered surveyors seeing an increase in bidders.
RICS chief economist Simon Rubinsohn said that lack of finance is one of the key factors hampering the markets and rental declines will weigh on property pricing across many developed economies into 2010, reflecting both rising availability and weaker labor markets.
Higher yields may start to help in markets such as the UK and Hong Kong where prices have already corrected significantly and borrowing and saving rates are at historic lows and in emerging markets those countries tied into Chinese trade relationships appear to be weathering the storm better than most with parts of Latin America and Africa including Mauritius, Nigeria and Ghana holding up relatively well, he explained.
‘Emerging Asia in particular stands out as the regional outperformer with a marked slowdown in the pace of rental declines and tenant demand in China and India rising for the first time since 2008,’ he added.
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