Weak intra-regional trade, sluggish global economic growth and low commodity prices have battered confidence in Asia's commercial real estate sector, according to a survey from the Royal Institution of Chartered Surveyors (RICS).
According to the Q2 2016 RICS Global Commercial Property Monitor, India and Japan are the only two markets in Asia-Pacific in which both the occupier and investment index readings are in positive territory, suggesting a general downbeat mood in the region.
Oversupply has dampened the outlook in China. The availability of leasable space rose at the sharpest quarterly pace since 2009, while occupier demand fell, albeit slightly, across all sectors. Excess supply continues to dampen the outlook for rents and capital values, with respondents to the survey expecting both to fall significantly across secondary locations. However, prime market segments are likely to prove more resilient, the survey said.
Japan also has a downbeat outlook as investment enquiries failed to increase for the first time since 2011, with 70 percent of the survey's contributors believing the market has peaked. An exceptionally tight supply should, however, support capital values in the near term as price expectations remain broadly flat over the next twelve months, the survey said.
In Singapore property professionals believe the commercial property market is headed for further decline as rents contract over the next 12 months as sluggish GDP growth and weak performance in the services sector continues to weigh on occupier demand.
But, in India the forecast is more rosy as respondents expect substantial near term gains in capital value and rental projections. Over the next three years, those surveyed expect growth to accelerate across all areas of the market.
The commercial property market in Australia remains relatively subdued, according to the survey. While occupier demand is broadly stable, availability continues to rise, depressing rental expectations. Meanwhile, investment enquiries in the country increased only marginally according to the latest results.
“The survey results also support anecdotal evidence of increased interest and activity in India. While Australia and Japan remain a key focus for many investors, opportunities in these markets may be more limited in the future,” commented RICS senior vice president Chris Brooke.
“This suggests investors may need to consider deploying capital in a broader range of geographical markets and real estate sectors throughout Asia Pacific to generate acceptable returns.”