Japan commercial property continues strong momentum

Photo: Doug

Japan posted the highest readings for RICS Global Commercial Property Monitor's composite Investment Sentiment Index (ISI) and Occupier Sentiment Index (OSI). It continues a run of firm underlying results going back six quarters, with the UK and New Zealand close behind. Forward looking indicators suggest Japan's robust picture should be maintained over the next 12 months at least, with further growth in capital values and rents anticipated by survey respondents.

The latest monitor also shows solid momentum in the US, UAE and Hungary, particularly on the occupier side, with meaningful growth in tenant demand (likely a result of improving labour markets) placing upward pressure on rental expectations at the twelve month horizon. Investor sentiment remains upbeat in Germany, while the revival continues in some of the peripheral euro area nations which were worst hit by the 2008 global financial crisis.

Indeed, confidence returned to Portugal, Spain and Ireland during the latter half of 2013 and the recovery has become increasingly well established ever since. As such, these three markets rank highly in terms of growth in occupier demand and investment enquiries, and this is supporting the medium term outlook for rents and capital values.

Meanwhile, the BRICS markets appear to be experiencing mixed fortunes. Medium term prospects for India are encouraging, with sizeable gains projected for rents and capital values of around 10 per cent per annum, over the next three years. Alongside growing optimism about the country’s economic performance, these buoyant expectations are eing driven by the government’s approval of REITs (announced in the latest budget) with the entire Indian sample stating that funding in the commercial real estate sector should be improved as a result.

Meanwhile in China, growth in supply is outstripping that of demand in both the occupier and investment sectors, contributing to a flat near term outlook for rents and capital values. Furthermore, OSI and ISI readings have now been negative for two consecutive quarters, the first time this has occurred since 2009. South Africa demonstrates similar trends to those of China, but investor interest did see an uptick over the past three months.