European Commercial Real Estate Languishes

The Royal Institute of Chartered Surveyors (RICS) reports that the Eurozone financial crisis continues to weight heavy on the European commercial property market, although the third quarter of …

The Royal Institute of Chartered Surveyors (RICS) reports that the Eurozone financial crisis continues to weight heavy on the European commercial property market, although the third quarter of 2012 did see a pinch of upward movement. Things looked a bit rosier in other parts of the world, however, as the U.S. market made modest growth while Canada and the United Arab Emirates also enjoyed positive reports. China’s growth is slowing, but demand is still strong there as well as in Hong Kong, Russia, Brazil and Thailand. RICS analysts are optimistic about the future despite marginal third-quarter performance and hopes new policies anticipated within the Eurozone will help spur more positive results. For more on this continue reading the following article from Property Wire.

The European sovereign debt crisis continues to take its toll on the region’s commercial property sector, with the majority of markets recording falling activity and negative expectations.

However, the picture did nonetheless marginally improve in the third quarter of 2012, according to the latest global commercial property survey from the Royal Institution of Chartered Surveyors.

More countries recorded positive results than in the previous quarter of the year and while the overall assessment in Europe remains bleak, the introduction of the European Central Bank’s Outright Monetary Transaction (OMT) programme likely played a role in lifting sentiment.

Globally, the survey shows real estate sentiment remained fragile in the third quarter, particularly in occupier markets, as the global economy faces strong and persistent headwinds.

Economic activity in Europe is contracting, while growth in the US remains modest. The Chinese economy has also slowed, and uncertainty about its near term prospects is greater than was the case some months ago.

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In Europe, Russia experienced the strongest occupier and investment activity. Inside the Eurozone, Germany was the best performer, though rental and capital value expectations have fallen. France, Italy, Greece and Spain saw some of the biggest falls in occupier demand, alongside further increases in available space. This is weighing down on rental expectations. Other European countries such as the Netherlands and Switzerland also appear under pressure.

There are also clear signs that some emerging European countries are seeing confidence begin to fade. After several quarters of positive results, Poland and the Czech Republic are now experiencing weaker readings across most indicators.
Nevertheless, the RICS survey indicates that the number of countries reporting increases in occupier demand has clearly risen, compared to the previous quarter from three to seven, including Russia, Belgium, Romania, Hungary, Germany, Austria and the Republic of Ireland.

Developments in Europe’s investment market also look better this quarter with eight countries recording increases in investment demand, compared to six previously. Again, Germany and Russia were among the best performers, but they were joined by Ireland, Austria, Poland and the Scandinavian markets.

The sentiment survey highlights the deterioration of the French market, with tenant demand and investment activity now falling at a faster pace than in Greece and Spain. Meanwhile, the Irish commercial property market, after a long period of contraction, is showing signs of a stabilisation in activity, although expectations are still negative.

‘At world level, the most positive trends in occupier markets are to be found in Russia, the UAE, the US and Canada, where demand from tenants is rising and available space is constrained. Demand also remains bullish in Hong Kong, Japan and China. New development is rising in markets with strong demand, but especially so in Brazil, Thailand and Canada,’ said Simon Rubinsohn, RICS chief economist.

‘On the investment side, enquiries were rising in roughly two thirds of the responding countries, suggesting that the recent trend of rising investor appetite has continued. Capital values are expected to rise strongly in Russia, Brazil, Hong Kong and Canada,’ he explained.

Looking forward, RICS is cautiously optimistic that the introduction of the European Central Bank’s outright Monetary Transaction Programme, enabling the ECB to buy unlimited amounts of Euro zone sovereign debt, in conjunction with plans to establish a European banking union, will gradually foster improved risk appetite and greater financial stability across Europe.

‘This should lay the groundwork for an eventual recovery in the region’s economy and commercial property sector in the medium term, but the coming year is likely to remain challenging,’ added Rubinsohn.

This article was republished with permission from Property Wire.


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