RICS Release Global Property Survey – 4th March 2009

New York – March 4 2009 – The Royal Institution of Chartered Surveyors (RICS), the world’s largest organization for professionals in property, land, construction and related environmental issues, today released its highly regarded RICS Global Commercial Property Survey for the fourth quarter of 2008. The survey, which is a strong lead indicator for property market trends, measures the sentiment of executive-level commercial property professionals from eight regions around the globe.

This latest report illustrates that Commercial real estate values are now declining in every region across the globe. In Q3 of 2008, the developed emerging countries saw modest increases in capital values, this has now given way to sharp decreases, with the developed world experiencing even stronger declines:
The previously strong performing UAE (United Arab Emirates) saw capital values plummet with the net balance of member responses shifting from a positive 65% to a negative 83%.
In Russia worries over macro stability has seen reduced investment and lower capital values.
Latin America, until now relatively resilient has seen prices fall across all sectors, with the rental market proving the exception to the rule.
In Emerging Europe and Emerging Asia investment demand for commercial real estate shows itself to be particularly weak.
Rental expectations generally have turned decisively downwards with North America and Developed Asia generating the most negative results closely followed by Emerging Europe and Emerging Asia, due to worldwide declines in tenant demand.
Yields/cap rates are expected to rise further in all parts of the globe with the exception of Emerging Asia where the collapse in rents proves more decisive.

In the US, the fragile financial system, lack of liquidity and worsening economic climate has fuelled already difficult property conditions:
(Click here to view a the following charts)
Tenant demand has fallen sharply and is expected to weaken further over the coming months (chart 4), with evidence of this trend being reflected in a further rise in inducements (chart 6) and space availability (chart 5)
Alongside this, investor interest in commercial real estate has fallen sharply (chart 7) as shown by the decline in the number of investor bidders per property (chart 8)
Capital values have sharply decreased and are expected to fall further (chart 1)
Property yields/cap rates are expected to rise further (chart 2)
Surveyors are almost uniform in anticipating further declines in rents (chart 3)

“The effects of the global economic downturn are clearly illustrated by the impact it is having on Commercial Property markets around the globe, with all sectors, retail, industrial and office experiencing tremendous difficulties. No geographic area has escaped the wrath of the recession and the current sentiment suggests that worse is yet to come” said Simon Rubinsohn, RICS Chief Economist.

Matt Bruck, RICS Americas Managing Director, concurred with Rubinsohn’s comments, noting that “the across-the-board problems in the U. S. market underscore the severity of the situation and demonstrate that, in a global economy, no one is immune from such challenges. We are now moving into unchartered waters.”