26 APR 2018
The RICS Global Commercial Property Monitor indicates that momentum in most commercial property markets across Asia Pacific was positive in the first quarter of 2018. Despite concerns over valuations in some markets, respondents indicate that momentum is likely to increase over the next 12 months.
Contributors to the Q1 2018 RICS Global Commercial Property Monitor indicate that sentiment remains positive at the start of the year, despite some concerns surrounding valuations and a lack of high-quality space.
The Occupier Sentiment Index (OSI) and Investment Sentiment Index (ISI), indicate that short-term momentum remains positive in most of Asia Pacific, and indeed global, commercial property markets. However, there is some dispersion within the region, as Bengaluru and Wellington continue to exhibit slightly more positive momentum in the short-term, less so for Christchurch and key ASEAN cities.
Respondents are significantly more bullish on the outlook for rents and capital values over the next year. The more optimistic outlook is evident in the difference current versus expectations for future conditions. Expectations for Bengaluru are among the most bullish globally, while Singapore and Australian cities (with the exception of Brisbane) are among the cities that are expected to see a fairly significant increase in momentum.
Although this dynamic is not unusual, the difference between current conditions and expectations is more marked than in previous quarters.
However, the optimism is not without risks. Many core Asia Pacific markets are still seen as expensive by the majority of respondents. This is generally correlated with respondents’ perceptions of the phase of the cycle; Melbourne, Sydney, Tokyo, Hong Kong and Auckland are seen as being at the peak of the current cycle by more than 50% of respondents in these cities. However, this has been the case for several quarters for Sydney, Tokyo, and Hong Kong, and respondents continue to expect an expansion in rents and capital values in these markets. Meanwhile, Christchurch and Kuala Lumpur are both still in the midst of a downturn, though contributors indicate that the commercial market in Perth has bottomed-out.
This quarter, survey participants were also asked about what they see as the top global risks to global commercial real estate markets. Geopolitical and economic uncertainty, as well as inadequate infrastructure, were seen as two of the top risks, both globally and regionally.
Interestingly, despite this survey being open during elevated protectionist rhetoric, few markets either within Asia Pacific or globally highlight protectionism as a major concern. Meanwhile, increased data availability, future transport and infrastructure were seen as having the greatest market impact and impact on commercial real estate investment, respectively.