Members of RICS are increasingly confident about the commercial property market despite persistent fears that the economic recovery may not last, according to the organisation’s latest quarterly survey.
Members of RICS are increasingly confident about the commercial property market despite persistent fears that the economic recovery may not last, according to the organisation’s latest quarterly survey.
Improved access to finance as credit conditions are relaxed are among the main reasons given for the positive outlook, along with economic growth in major economies and the rapid recovery in nations such as Ireland, Spain and Portugal.
The general optimism is tempered by poor returns from the emerging economies of Brazil and Russia, where rents and capital values are expected to decline over the next 12 months.
The Royal Institution for Chartered Surveyors' Global Commercial Property Monitor for Q1 2015 reports confidence is strongest in New Zealand, while investors in Germany and Japan also have largely positive expectations. Europe’s ‘recovery bloc’, Ireland, Spain and Portugal, is expected to see above-average returns with respondents suggesting the latter two markets offer greater value, while real estate in the United Kingdom and the United States should be underpinned by relatively solid economic growth.
‘Cheap money fuelled by the actions of key central banks is helping to drive real estate markets,’ said RICS chief economist Simon Rubinsohn. ‘This positive trend is likely to continue across much of the globe over the next 12 months. But while sentiment is increasingly upbeat, there are a number of risks that should not be ignored, including the speed at which the US Federal Reserve chooses to lift interest rates from current lows and whether the Chinese authorities are able to engineer a soft landing for that economy.’
Members were less positive about the value of commercial real estate in their domestic market, with more than half of respondents in the US, Japan, Hong Kong and Germany rating the market as either expensive or very expensive. The figure for Brazil was 64% and in Switzerland more than two-thirds considered real estate to be very expensive.
At the other end of the spectrum, more than half the contributors from Romania and Portugal and large majorities in Hungary, Bulgaria and Spain believed their markets to be either extremely cheap or cheap, while growing numbers of Russian members took the same view.