According to the latest RICS Global Commercial Property Survey (GCPS), property markets in emerging economies continued to outperform those in developed economies during the third quarter.
Emerging markets that were relatively unscathed by the financial crisis are experiencing faster growth than developed economies such as the UK, Eurozone and US. Property markets in China, Hong Kong, Singapore and Brazil are performing strongly with India witnessing the fastest pick up in investment transaction activity of any of the major economies during Q3. Indeed, this is the first time in 6 years that India has topped the global ranking tables for investment transaction activity across major world property markets.
The quarterly report reveals that occupier markets in Asia have picked up for the second consecutive quarter, with visible improvements in Thailand and Vietnam which had been lagging the regional recovery. In the Indian occupier market, growth in tenant demand continues to be most visible in the office sector with the retail and industrial areas seeing only modest improvements in activity for the second consecutive quarter. However rental expectations have failed to pick up with 25% more surveyors expecting rents to rise than fall in comparison to 27% in Q2. The key factor holding back a stronger rise in rental expectations appears to be an oversupply of available property to occupy.
On the investment front, India sits behind only Singapore and Poland in terms of growth in transaction activity when compared to the previous quarter. Despite investor enthusiasm, India continues to lag behind China on several forward looking indicators such as rental and capital value expectations, predominantly due to less supply constraints. Indeed India ranks 3rd in the occupier availability tally behind the Netherlands and UAE This feature of the market continues to temper sentiment towards the likelihood for robust rental advance. Confidence towards commercial rents in India slipped 6 places to 12th. A similar dip has also been seen in capital value expectations, now ranked 18 in the overall tally. Expectations may have been tempered somewhat by recent interest rate hikes by the RBI with more in the pipeline for 2011,
Simon Rubinsohn, RICS chief economist, comments on the global market conditions -
“The more heavily indebted countries in Western Europe, Japan and the U.S. face increasing problems with deleveraging and potential new regulation. This is likely to continue to be a drag on their performance for some time to come. Meanwhile, capital flows are likely to be increasingly directed towards real estate opportunities in the emerging world.’’
Key Highlights of the India Survey Q3 2010:
Investor activity has risen at the fastest pace since 2006, especially in the office and industrial property space.
Rental expectations remain modest due to respondents reporting a large supply of available property to occupy across all segments.
Capital values continue to rise, albeit marginally for the fifth consecutive quarter despite the notable increase in transaction volumes.
Commercial project development starts rose across all three sectors in Q3 for the first time since Q1 2008
Commenting on the current and expected market environment in India, RICS members said:
Amit Goel MRICS, Millennium Spire
"We continue to observe increased investor activity in the RE market. This continues to push capital values up while rental values remain stable. Number of occupier enquirers continues to increase, but visible reduction in vacancy is yet to happen."
Prakash Challa MRICS, SSPDL Limited
"Commercial office market remains oversupplied. Rental enquiries/purchase enquiries increased. Residential markets are very buoyant and stock movement are good. Capital values have gone up in the residential sector, as have values of retail space."