Occupier demand for U.S. commercial property continues to improve and rental expectations remain steady, according to the latest RICS Global Commercial Property Survey for Q2 2011.
The occupier demand net balance went up to +31 in Q2 (from +25 in Q1). But the report also noted that rental expectations, which had turned positive in Q1, moved back into negative territory (to -11 from +5).
Net balance percentages, or scores, are calculated by subtracting the number of respondents reporting “down” from the number who reported “up.”
RICS Global Commercial Property Survey
The report indicated the office sector appeared marginally stronger than retail and industrial in the U.S.
Investor demand is also rebuilding, with investment expectations over the next three months reported positive across all sectors, the report said.
Simon Rubinsohn, RICS chief economist, said, “We would have expected our survey results to reflect some impact of the recent economic ‘soft patch,’ but interestingly, it looks as though commercial property markets around the world remain strong, regardless.
“China, in particular, has proven remarkably resilient in the face of the introduction of a series of measures designed to cool the market. Capital value and rental expectations remain buoyant in much of the world indicating a continuing level of optimism. That said, the tentative recovery in the U.S., visible in the previous set of results, already appears to be faltering and it is noticeable that the momentum in the Indian real estate market seems to be slackening.”
The majority of countries surveyed witnessed positive growth in occupier and investment demand and development starts during Q2, despite more increases in energy costs.
For example, the Canadian market has seen strong investor demand over the past several quarters. Occupier demand in Canada leapt to +62 in Q2 (from +37). The rental expectations net balance jumped to +31, the highest reading since 2008 Q2, the report stated.
In addition, increasing occupier demand coupled with limited available space in Brazil continues to firmly underpin positive rental expectations in the country. The net balance of development starts eased to +13 from +53, the survey said.
Outlook Remains ‘Optimistic’
The outlook for the next quarter remains “optimistic;” as the majority of countries reported positive rental and capital value expectations. Further, more than three-quarters of respondents are expecting investment demand to grow.
The RICS Global Commercial Property Survey is a quarterly guide to developing trends in commercial property investment and occupier markets around the world.