Worsening economic conditions have now taken a toll on almost every commercial property market in the world, according to a global survey of real estate surveyors.
The past few months have seen a sharp deterioration in performance and demand for real estate in many regions that had appeared resilient to the credit crisis, in particular parts of Asia and eastern Europe.
The slump in commercial property is well established in mature markets such as the UK and US, but a report on Sunday from the Royal Institution of Chartered Surveyors shows few property markets in the world unscathed by the economic crisis.
The net balance of movements in global rents turned negative for the first time in the survey’s history, led by weakness in the US, Japan, Spain, Ireland and India, while property values also worsened markedly in the third quarter.
The report, which measured sentiment among surveyors about the value and tenant demand for property, singles out the Indian market as being particularly hard hit. The region has attracted many overseas investors hoping to tap into the property needs of a previously booming economy.
Rising interest rates, higher inflation and a lack of liquidity is affecting confidence in the country, says the report, and 45 per cent more surveyors reported a fall in occupier demand compared with 6 per cent in the last quarter. The balance of surveyors reporting investor purchases plummeted from zero to -73.
The biggest fall in capital values has been in eastern Europe, a marked turnround considering expectations of growth only three months ago.
These again have been the most active areas for real estate investment in the past few years as funds moved into untapped territories for cheaper property as the more mature markets became overpriced.
About 46 per cent more surveyors reported a fall than a rise, in values, compared to 1 per cent in the second quarter, with 56 per cent more recording a fall than a rise in investment demand compared to 9 per cent last quarter.
Hardest hit was Russia, where the net balance of surveyors reporting falls in investment demand fell from a 16 per cent to -79.
Simon Rubinsohn, RICS chief economist, said: “The credit crunch has now extended its grip into emerging markets.
“Large interest rate cuts by central banks should eventually provide some support. However, with liquidity still tight, and tenant demand softening further, pressure on the commercial sector is inevitable in the near term.”
China was one of the few areas to show resilience, says RICS. Most of the indicators remained in positive territory, with both supply and demand holding up and expectations generally upbeat.
The UK and US markets continue to struggle. Property investments have been hamstrung by a lack of bank debt and expectations of further price falls, despite the fact that almost a quarter has been wiped off the value of property already since the market correction began last summer.
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