The latest RICS Indian Commercial Property Survey published today suggests that rental activity in India picked up at a notably faster pace in the fourth quarter which has lifted optimism among property professionals. Significantly, the strengthening in tenant demand has occurred across the three major sectors (office, industrial and retail) although rising available space continues to keep rental expectations in check.
Confidence in the outlook for rental activity over the next three months has moved sharply higher with the biggest pick up expected in the office sector. As a result, a net balance of only 3% more surveyors are reporting negative rather than positive rental expectations indicating that rental declines should abate in the coming months. This is a significant improvement from expectations 6 months earlier when 44% more surveyors were expecting declines. In addition, the survey also shows that sentiment in India is less downbeat than other major economies, such as the US, Germany and Japan.
Highlights of RICS Indian Commercial Property Survey Q4 2009:
- Tenant demand rises at a faster pace across all sectors
- Rents expected to stabilize in Q1 2010 and rise in industrial property on lower available space
- Capital value expected to rise further in Q1 2010
- Investment bidders per property turns positive for the first time in 6 quarters
Meanwhile, it was reported that the use of inducements increased at a slower pace in Q4 as the balance of power is gradually shifting back towards landlords. On the supply side, the development pipeline edged up, while available space increased at a slightly faster pace than in Q3 2009. Encouragingly, investment bidders per property has turned marginally positive which alongside the stabilisation in rents has driven yields lower at a faster pace than in Q3. Capital values are now rising across all three sectors for the first time in over 2 years with the biggest rise in the net balance recorded in the retail market. More modest rise were reported in the office and industrial sectors.
Compared to other countries in the Emerging Asia region, India saw the highest growth in tenant demand compared to the previous quarter. It is still lagging the Chinese economy on most other indicators such as investment bidders per property and rental expectations although with rents now stabilising, further declines in yields seem inevitable in Q1 2010.
Moreover, according to the RICS Global Commercial Property Survey Q4 2009, investor activity rose across 70 percent of the Globe as commercial property recovered as an asset class says RICS Global Property Survey.
Commercial property transactions rose across the majority of the globe with Brazil and China leading the way. With generally low interest rates and relatively high yields, investors have returned to commercial property. The net balance of surveyors reporting a rise in transactions in Brazil rose from 29 percent to 61 percent in the fourth quarter while the net balance in China edged up from 58 percent from 47 percent. By way of contrasts, more surveyors again reported a drop in activity in the US. Occupier demand has also been most visible across the emerging economies with lettings activity picking up most in Latin America, emerging Europe and most of Asia.
The UK property recovery was led by the London office market, with the amount of available space declining for the first time in two years. However, elsewhere in the UK* and across 90 percent of the globe, the amount of available space continued to rise. There were some notable exceptions. Brazil, Peru, Venezuela, Austria, Hong Kong and Ghana are all witnessing mild declines.
Surveyors are confident that the emerging economies, particularly in Latin America and Asia, will continue to lead the property recovery into the first quarter of 2010 but concerns persist over the outlook for some of the more developed real estate markets. Surveyors generally remain downbeat on the US, Japan, Germany, Italy and the UAE.
According to Mr. Simon Rubinsohn, RICS chief economist, “The latest Global Commercial Property Survey demonstrates in the clearest possible terms that it is emerging real estate markets where sentiment has turned around most significantly. Crucially, the improvement in investor appetite is being accompanied by a firmer tone to the rental market. This is key to ensuring that the recovery proves sustainable.
The strength of the results contained in the survey for Latin America and Asia are a reflection of the unfolding economic recovery with many of the more developed markets likely to be hampered by the challenges resulting from the ballooning of public sector debt and need of the authorities to gradually exit from emergency monetary conditions."
According to Mr. Sachin Sandhir, Managing Director and Country Head, RICS India, “The results of this quarter indicate that with improving economic conditions in India, the commercial property market is also getting fortified and moving closer to stabilization. Tenant demand has been improving gradually over last two quarters and confidence towards future rental activity is also quite positive. Rental declines have more or less stagnated but the amount of space available and in pipeline will keep rental increases in check, barring industrial space where there is comparatively lesser available space. Modest rise in capital values across sectors is also encouraging”.
View the full survey - RICS Global Commercial Property Survey Q4 2009
View the full survey - RICS Indian Commercial Property Survey Q4 2009
About the Global Property Commercial Survey
RICS’ Global Commercial Property Survey is a quarterly guide to the developing trends in the commercial property investment and occupier market. This edition details market conditions for the fourth quarter of 2009 based on information collected from leading international real estate organisations and local firms.
About RICS
RICS is the world's leading self regulatory professional body for qualifications and standards land, property, construction and associated environment issues. In a world where more and more people, governments, banks and commercial organisations demand greater certainty of professional standards and ethics, attaining RICS status is the recognised mark of property professionalism.
Over 150 000 property professionals working in the major established and emerging economies of the world have already recognised the importance of securing RICS status by becoming members.
RICS is an independent professional body originally established in the UK by Royal Charter. Since 1868, RICS has been committed to setting and upholding the highest standards of excellence and integrity – providing impartial, authoritative advice on key issues affecting businesses and society. RICS is a regulator of both its individual members and firms enabling it to maintain the highest standards and providing the basis for unparalleled client confidence in the sector.
