Confidence falls as Asia Pacific commercial property conditions deteriorate

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Sentiment has turned “decisively negative” in commercial property markets across Asia Pacific, as the slowing global economy dampens the outlook for real estate, according to RICS.

Survey respondents in the RICS Q3 2019 Asia Pacific Commercial Property Monitor indicated that conditions deteriorated significantly during Q3 2019.

“After a period of fairly subdued momentum which coincided with the onset of trade and geopolitical uncertainty, sentiment has turned decisively negative,” the report said.

However, respondents were optimistic on rental and capital values. Rental and capital values in most markets except for Hong Kong should hold steady or rise over the next 12 months.

Hong Kong saw a particularly sharp deterioration, driven by the ongoing political protests and the fallout from the US-China trade war.

Vietnam, on the other hand, continues to benefit from the US-China trade dispute, with respondents reporting strong demand for industrial properties, as supply chains look for regional alternatives to China.

The survey data shows a widespread moderation in commercial real estate market conditions across Asia Pacific, with respondents indicating falling confidence in China and South Korea.

While momentum appears to have slowed in New Zealand, sentiment remained unchanged in India, Australia, Sri Lanka, Singapore and Japan.

As a sign of the late-stage property cycle, the survey showed that demand was lagging supply in most markets.

The supply and demand conditions are dragging on rental and capital value expectations in the majority of markets except for Tokyo.

Globally, central banks continue to lower interest rates to offset concerns around the sluggish economic outlook.

Calls from central banks to boost expenditure are likely to face opposition amid budget constraints.

“Against this backdrop, it is unlikely that there will be a sharp pick-up in momentum across commercial property markets in the near-term,” the report said.