In addition, negative sentiment colours the global outlook for Q4 2011 with almost two-thirds of countries reporting negative rental and capital value expectations and nearly two-fifths reporting an expected decline in investment demand.
The RICS Global Commercial Property Survey is a quarterly guide to the developing trends in commercial property investment and occupier markets around the world. Providing a snapshot of sentiment, the current edition details market conditions for the third quarter of 2011 based on information collected from leading international real estate organisations, local firms and other property professionals.
Simon Rubinsohn, RICS Chief Economist, said: "While certainly not heartening, it is also not especially surprising that this quarter’s survey results reflect the impact of today’s softer macro-economic picture. The global real estate market flourishes when economic conditions are stable and strong.
"At the moment we are dealing not only with considerable levels of uncertainty in financial markets around the world, but also an intensification of the euro area crisis and the threat of a recession in the US. Confidence has definitely taken a knock. That said, there remain key areas of resilience – China, Brazil and Russia – and we have seen positive momentum in several other countries as well, Japan most notably. Although we doubt that the developing economies can completely insulate themselves from the challenges facing the West, our suspicion is they will continue to outperform and this will be reflected in real estate markets."
Looking at the UK, this quarter’s survey shows that the commercial property market is experiencing increasing weakness.
Occupier demand fell back into negative territory while the pace of available space picked up slightly.
Development starts remained negative as well, becoming slightly more so this quarter while investment enquiries are broadly flat. Looking ahead, agents seem fairly pessimistic about next quarter, registering expectations for a drop in investment demand, and a further deterioration in rental and capital value expectations.
A notable development this quarter is that the occupier market in London seems to be losing some momentum in response to the broader economic backdrop. At the all-property level, net balance results for rental expectations and tenant demand turned negative.
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