BANGALORE: Positive indicators for growth are increasingly evident across the real estate sector with results pointing to a slightly faster improvement in retail real estate compared with office and industrial. At the forefront of these trends are the UAE and Japanese real estate markets, where the Occupier Sentiment Index (OSI) and the Investment Sentiment Index (ISI), are firmly entrenched in positive territory. Significantly, twelve month forward expectations for rents and capital values in both countries are turning progressively upbeat reflecting the expectation that the economic recovery, now underway, will continue to gather pace.
Other markets posting a firmer trend in both, occupier and investor sentiment, include the US, New Zealand, South Africa, Russia and China. The healthy results from the US suggest that there is little immediate fear that Federal Reserve’s decision to begin scaling back the quantitative easing programme, will have a great deal of impact on the real estate market. Across Asia, results are providing mixed messages. Figures from Singapore paint a picture of an improving market with tenant demand and rent expectations rising for the third consecutive quarter after a difficult period and investment enquiries continuing to pick up. In comparison, data for Hong Kong remains generally downbeat, with a flat trend in the occupier segment and a greater level of concern amongst investors in view of recent government measures to cool the market.
European respondents, although acknowledging some signs of the market ‘bottoming out’, remain the most cautious in the global market on both, the current picture and future prospects.
The latest RICS India Commercial Property Monitor, shows the Indian real estate market to be fairly stagnant at present but with the economy expected to regain some impetus (2014 growth is widely forecast to be in the region of 5.5 per cent following the subdued 2013 expansion of 4.8 per cent), it is noteworthy that our longer term indicators are turning a little more upbeat. Significantly, although, both the RICS Occupier Sentiment Index and Investment Sentiment Index, are showing little positive momentum just now, the 12 month variables that the institution monitors, are consistent with a material improvement in the market.
This is reflected in the occupier segment, where the RICS 12 month rental expectations series, progressed further into positive territory and is now pointing to acceleration in rental growth over the course of the year.
Meanwhile in the investment market, capital value expectations at the 12-month horizon, are also gathering momentum, as a more upbeat mood spreads among investors. The headline reading posted this time around, is indicative of significant improvement in sentiment compared to the third quarter.
While rents are anticipated to see sizeable growth in all sectors throughout the course of 2014, the rebound is most apparent in the office segment, although, the retail and industrial sectors, also exhibit firm readings. With regards to capital values, again, all sectors are forecasted to see a pick up in the coming 12 months. Indeed, even though expectations are most positive in the office sector, there is now considerable momentum in the retail and industrial areas of the market. To finish on a note of caution, the unexpected increase in the repo rate to 8 per cent, coupled with heightened volatility in emerging markets more generally following the upsurge in concerns about the shadow banking sector in China, provides a timely warning that significant risks remain to the prospects of a pickup in both the Indian and global economies.