23 MAY 2018
RICS Global commercial property, Q1 2018
In the latest edition of its quarterly Global Commercial Property Monitor, RICS highlights positive occupier and investment sentiment across the globe for the first three months of 2018. Stretched valuations and trade policies are among the few risks that are influencing investment strategies in the United States, Asia and Europe.
The European real estate market is still going strong, with cities like Amsterdam, Berlin, Frankfurt and Paris leading the way. When it comes to international hubs such as New York, Dubai and Shanghai, most respondents to RICS’ survey believe business shows signs of a downturn.
"Well established markets such as Berlin, Amsterdam, Munich, and Dublin continuing to be most attractive to investors and tenants alike. Lisbon and Madrid are also performing strongly as are some of the smaller CEE markets with cities such as Budapest and Sofia recording firm results. Although the development pipeline does slowly appear to be responding to market conditions in a number of these cities, contributors to the survey continue to highlight a lack of supply of good quality space as a key issue. This appears to be a factor underpinning expectations for rental growth particularly on, what may be judged, prime real estate. Significantly, supportive occupier trends appear to be sustaining positive sentiment in the investment market notwithstanding ongoing concerns about valuation; around 80% of contributors from Germany, perceive the market as being expensive or very expensive with the proportion from France taking the same view only slightly less than this." RICS Chief Economist Simon Rubinsohn comments
In Germany: Both office and industrial sectors saw another robust increase in occupier demand over the quarter. Meanwhile, demand for retail space remained stagnant.
Twelve months capital value expectations were scaled back, to a greater or lesser degree, across each sub-market covered by the survey. Nevertheless, values are anticipated to rise across all sectors, with the exception of secondary retail, where a flat outturn is now anticipated. At a city level, the most elevated capital value projections were again returned in Berlin (offices especially), although respondents were less upbeat on the outlook than three months ago.
The office sector also displays the strongest year ahead projections in Frankfurt, Munich and Hamburg, while secondary retail is the weakest in each instance.
In France: Tenant demand increased in robust fashion across the office and industrial sectors once more. However, demand for retail space contracted for the third successive report.
On the investment side, office and industrial values now anticipated to rise at a similar pace, while retail (secondary in particular) remains the laggard.
In Paris, 66% of respondents feel market conditions are approaching the peak of the current cycle.
In Spain: Capital value expectations for the coming year remain positive, to a greater or lesser degree, across all sub-sectors.
In Madrid, rental and capital value expectations remain more elevated than the national average. Prime office rents look set to post significant gains while the outlook is also robust for prime industrials and retail rents. Expectations are more modest across secondary markets.
In Italy: Rents are expected to post solid gains for prime office and retail space over the year ahead. While the secondary industrial sector is the only portion of the market displaying negative projections, the outlook is still flat for secondary office and retail.
When viewed at the city level, overall rental growth expectations are strongest across Milan, although this is driven entirely by prime space.
Respondents noted an increase in investment enquiries over the quarter. Demand from foreign investors increased in a similar manner, with the office and retail segments attracting the strongest rise.
In the Netherlands: Occupier Sentiment Index hits a fresh record high and findings display robust momentum behind the investment market at present. In Amsterdam, both prime and secondary office values are expected to rise (albeit prime is still seen outperforming comfortably).
About the RICS Commercial property monitors: RICS’ Global Commercial Property Monitor is a quarterly guide to the trends in the commercial property investment and occupier markets. Individual reports per market can be found on our web. Download the reports and Follow us on twitter: #RICSCommercial
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