Asian realty market doing well: RICS survey

Occupier markets picked up further in Q2, with more countries indicating that lettings demand moved higher compared to the first quarter. The rise in lettings activity remains insufficient to exert upward pressure on rents in the majority of markets as available space continues to move higher in all but a handful of countries. Indeed, rents continue to fall in 30 of the 46 countries surveyed. Available space continues to increase in eight out of 10 countries surveyed.

Confidence towards commercial rents in Q3 2010, in India ranked sixth highest among 46 countries even though lettings activity ranked lower at 13th position. While confidence towards capital values in India was relatively strong at 10th rank, investment activity in India was relatively lower as compared to other countries, implying that other countries offer better investment returns.

Speaking on the global market conditions, Simon Rubinsohn, RICS chief economist, points out, “Strong growth in  the likes of Brazil, Hong Kong and India, is continuing to boost demand for new space from occupiers as well as encouraging investment activity.

Meanwhile in many of the latter, fiscal retrenchment allied to bank deleveraging continues to place significant obstacles in the way of a meaningful recovery in the commercial property market.”

According to the RICS Global Distressed Property Monitor for Q2 2010, distressed properties coming to market are continuing to rise globally. While the US and Republic of Ireland expected to see the fastest pace of increase in distressed assets in Q2 2010, Australia, Russia, Hong Kong and India continue to report declines in expected distressed property listings.

The RICS India Commercial Property Survey Q2 2010 suggests a modest rise in tenant demand and lettings activity, indicating possible strengthening of rentals in future
The highlights of the India Survey Q2 2010 are as follows:

Tenant demand rises at a faster pace across office and retail markets. While improved corporate profits seem to be the demand driver for office property, retail property has also seen an upswing, as a result of improved economic climate within the country, making it an attractive market for global retailers as well.

In tandem with tenant demand, lettings activity and rental values are also likely to move higher across all three sectors in the third quarter Capital values have risen faster across all three sectors.  A further increase over subsequent quarters may be witnessed, as demand for commercial property improves and excess supply is absorbed in the market.

Investment bidders per property rose modestly for the third consecutive quarter, while investment transactions remained stable. As compared to India, capital values in Brazil, France and Peru are expected to increase higher given the positive outlook on yields, making these markets more attractive to investors.

Commenting on the current and expected market environment in India, Ramesh Avadhani MRICS, IREO Fund said, “Currently, there are quite a good number of investment transactions happening in Tier 1 cities in commercial office space including IT and corporate parks. This trend is likely to continue. Depending on the location and quality of the assets, we are witnessing cap rates at 10.5 - 12% generally.”