25 FEB. 2019
The respondents to the RICS Global Commercial Property Monitor, the leading global indicator of conditions in commercial property occupier and investor markets, have described the majority of the world’s real estate markets as rather stable, for the fourth quarter of 2018, despite heightened macro risks. The strongest readings in absolute terms, both as far as the occupier and investor markets are concerned, continue to be found in Europe.
Greece, Hungary, Portugal and Spain are Europe’s top commercial real estate performers.
In terms of the bigger investment markets, Germany and the Netherlands continue to attract considerable interest, although the former is viewed as being closer to the peak of the cycle and generally more stretched from a valuation perspective.
Positive sentiment was noted in the commercial property market in Poland. The tight jobs market and stellar wage growth have continued to support solid domestic demand and in turn, economic growth. Rental and value growth projections for the year ahead remain firm with the prime industrial and office segments standing out.
Changing consumer behaviour and the shift towards online shopping in particular, is negatively impacting retail occupiers, with vacancy rates rising across the sector in Europe. By way of contrast, demand continues to pick up across the office and industrial segments in Germany, and this is expected to deliver further capital value and rental growth over the coming year.
In France, the retail sector, particularly within secondary locations, also experiences a tougher set of conditions. Indeed, demand from investors remains in decline, driven by deteriorating occupier fundamentals and the subsequent rise in vacancy rates.
The results for the UK are slightly weaker compared to Q3, with the ISI turning slightly negative for the first time since the second quarter of 2016 (covering the period of the EU referendum). This is still consistent with transaction activity remaining close to current levels but does seem to capture a little more caution as the negotiations around Brexit become more fraught. Although the proportion of respondents seeing enquiries from businesses looking to relocate to elsewhere in the EU was little changed over the quarter, many comments from contributors did highlight uncertainty engendered by Brexit as a challenge for the market.
RICS Economist, Tarrant Parsons, comments on Europe’s outlook:
“Investor and occupier sentiment remains particularly positive in Europe according to the latest RICS findings, but there is a sense that valuations are getting more stretched in many of these markets.
RICS data continues to show logistics as a strong sector in many parts of the world – the counterpart of the structural change in retail – but alternatives also have increasing appeal. Brexit remains the dominant theme in the UK – no-deal is widely seen to impart a negative impulse”.
The RICS Global Commercial Property Monitor is a critical market insight with quarterly trends in the commercial property investment and occupier garnered by professionals working across the globe. Data from the RICS Global Commercial Property Monitor is used by the ECB and is available for internal use by the European System of Central Banks in order to provide insights on developments in commercial real markets across the EU and assist in managing risks around financial stability.