Emerging Europe succumb to global turmoil - RICS

The real estate markets of Emerging Europe have experienced the largest slump in capital values of all the regions in the world. Some 46% more chartered surveyors reported a fall in capital values rather than a rise in the third quarter of 2008, compared to 1% reporting a rise in the previous quarter, according to the latest RICS Global Commercial Property Survey released on Monday.

The hardest hit country is Russia with the net balance of surveyors reporting falls in investment demand from a positive 16% to -79%.

Around 80% of the banking sector is owned by Western European banks and the supply of foreign currency lending to local subsidiaries has been severely restricted. Some 56% more chartered surveyors recorded a fall than a rise in investment demand compared to 9% in the second quarter.

In the UK, the credit crunch continues to depress sentiment - especially in the Central London office market where recent worries over the health of the hedge fund industry is only adding to a sense of pessimism. This is in stark contrast with Germany where demand and confidence is still high despite dropping capital values. In Germany the net balance of chartered surveyors reporting a rise rather than a fall in tenant demand is currently at 18% compared to a -52% in the UK.

RICS chief economist, Simon Rubinsohn said: 'The worsening economic climate is taking its toll on the commercial property markets in most parts of the world and the credit crunch has now extended its grip into emerging markets. Large interest rate cuts by central banks should eventually provide some support. However, with liquidity still tight and tenant demand softening further pressure on the commercial sector is inevitable in the near term.'