GLOBAL - Rental growth has turned negative on a global scale and the downturn in emerging markets is accelerating, the Royal Institute of Chartered Surveyors (RICS) finds in its latest quarterly global report.

The institute's Global Commercial Property Survey for the third quarter found that the net balance for global rents turned negative for the first time in the survey's history, with the US, Japan, Spain, Ireland and India showing particular weakness.

Oliver Gilmartin, senior economist for RICS, said: "The worst performing markets tend to be those linked with the Anglo-Saxon debt. The next stage is slower exports and slower industrial production and that is hitting Central and Eastern European countries."

Emerging Asia is expected to show significant declines in rents, caused by weaker office markets in India and China, while business demand and transactions across all the main sub-sectors of the commercial real estate market fell sharply for the first time in the region and also for those in emerging Europe.

"Companies are uncertain where they are going to obtain refinance. The last thing they are going to be doing is expanding," Gilmartin said.

Rental growth across emerging Europe's office sector showed a 27% balance (the proportion of surveyors reporting a rise in prices minus those reporting a fall), while retail and industrial sectors reported balances of 2% and 12%, respectively.

The balance for emerging Asia's rental growth in the office, retail and industrial sectors was 12%, 19% and 14%, respectively.

The United Arab Emirates has the most optimistic rental outlook, followed by, amongst others, Nigeria, Ukraine, Germany and Brazil.

Tenant demand, investment demand and capital values in emerging Europe are expected to drop significantly in Q4 compared with Q3, while yields are predicted to rise.
Transactions fell more quickly across developed countries, with the exception of Australia. In Latin America, Africa and the Middle East transactions started to level out.

Capital values are expected to fall across the majority of developed markets, in particular much of Western Europe, Australia and the US. Emerging Europe is the only developing region where prices are also predicted to fall sharply.

In comparison, capital values are expected to rise slowly in Africa, Middle East and stagnate in Latin America.