Commercial Property Upswing Continues

RICS Global Commercial Property Survey for Q1 2010

NEW YORK, May 5 /PRNewswire-USNewswire/ -- The commercial property upswing continued into 2010 with Latin America and Asia leading the way, according to the RICS Global Commercial Property Survey.

Commercial property transactions rose across the majority of the globe with Peru, Brazil and Singapore leading the way. With generally low interest rates and relatively high yields, investors have continued to find commercial property an attractive proposition. Elsewhere, transactions rebounded in the United States for the first time in three years with the net balance of property professionals reporting a rise in transactions moving from a negative 22 percent to a positive 13 percent. By way of contrast, more property professionals again reported a drop (than a rise) in activity in the United Arab Emirates and Greece.  

The increased level of transactions is providing support for a recovery in capital values. In Brazil, the net balance of property professionals reporting a rise rather than a fall in capital values jumped from 25 percent in the fourth quarter of 2009 to 63 percent in the first quarter of 2010. Significantly, the recovery has started to move into some parts of Eastern Europe with the net balance of property professionals reporting on capital values turning positive in Russia, Poland and the Czech Republic.

Despite this, the availability of real estate for occupation continued to rise across 90 percent of the globe. Australia, Hong Kong and Poland are notable exceptions to this trend.

Property professionals say they are confident that the emerging economies, particularly in Latin America and Asia, will continue to lead the property recovery into the second quarter of 2010 with sentiment toward capital values particularly strong in Hong Kong, Peru and Brazil. There has also been a material improvement in Russia.

Other key points include:

• New development starts are rising in Brazil, Peru and Chile.
• Capital values are still declining in Ireland, Spain, Turkey, Hungary and Greece.
• Rental declines are easing in the United Kingdom, France and Germany.
• Australian property market sees positive shift in investment activity.
• Rents rose in China for the first time in 18 months.
• Investment transaction activity in China grew at half the pace of Q4 .

In the United States, there is evidence of increased levels of debt capital on less stringent terms for commercial real estate, according to Dallas, Texas-based real estate valuation expert Steve Crosson, MRICS, of Crosson-Dannis Inc. "Few borrowers are attempting to retain control through bankruptcy or litigation simply because they perceive that there is no equity value to protect. As more banks strengthen, foreclosures and divestitures will accelerate throughout the year," Crosson said. "There has been a general increase in sales velocity of the basic property types. Sources of debt remain conservative in terms of underwriting and equity sources are modeling low hurdle returns compared to those of six months ago."

According to RICS chief economist Simon Rubinsohn, Latin America and Asia are still leading but there are signs of a rebound in the U.S. market.

"Cheap property (is) starting to attract investors for the first time in three years," Rubinsohn said. "However, one challenge still to be overcome in much of the developed world is the overhang of public sector debt. This could have consequences for both occupier activity and the ongoing strength of the investment recovery reflecting both the rationalization of government property space and the potential for higher borrowing costs."

Read the RICS Global Commercial Property Survey Americas Report here: http://bit.ly/c8PrVR

About the Global Property Commercial Survey

RICS' Global Commercial Property Survey is a quarterly guide to the developing trends in the commercial property investment and occupier market.  This edition details market conditions for the 1st quarter of 2010 based on information collected from leading international real estate organizations and local firms.

About RICS & RICS Americas

RICS (Royal Institution of Chartered Surveyors), with headquarters in London, is the leading organization of its kind in the world for more than 100,000 professionals in property, land, construction and related environmental issues.

RICS Americas, based in New York and covering North, Central and South America and the Caribbean, has more than 2,000 members in commercial and residential development, construction and project management, brokerage, planning and finance, valuation and fine arts appraisal. For further information visit www.ricsamericas.org or e-mail [email protected].

SOURCE RICS Americas