Prime office spaces to witness seven per cent growth in rentals: RICS survey

India’s commercial property market including office spaces and malls is set to witness 4-7 per cent hike in rentals with 7 per cent increase particularly in prime offices segment, according to a survey by RICS. As per RICS, India Commercial Property Monitor for the first quarter of 2015, confidence in the outlook for rents over the next three months would be more positive in the office and retail sectors.

RICS’ Global Commercial Property Monitor is a quarterly guide to the trends in the commercial property investment and occupier markets

“India’s overall policy and economic environment has turned little favourable for the property market and has contributed meaningfully to rise in occupier demand for the commercial real estate. Going further, we believe as the steps taken by the current government bear fruits in form of increase economic activity, the country will witness a significant rise in rental demand and income”, said Sachin Sandhir, Global MD, Emerging Business, RICS.

According to the commercial survey, the investment sentiment remained in positive territory in each of the last four quarters with investment enquiries increasing particularly in commercial space. The survey depicts capital values of the commercial properties are set to rise by around 5 per cent with prime office spaces expected to see the strongest gains at 7.8 per cent.

Meanwhile, RICS members around the world remain positive about the commercial property market even though concerns persist about the sustainability of the upswing in the global economy. With the exception of a few countries, the Global Commercial Property Monitor results for the first quarter (Q1) of 2015 find contributors to the survey generally upbeat.  This international survey tracks the sentiment of RICS members working in real estate and is released quarterly as a guide to the market outlook in selected markets.

An easing in monetary policy in many markets is one of the main reasons highlighted by respondents for the positive outlook. Relaxed credit conditions mean easier access to finance for investors that should support activity in the market

“Cheap money fuelled by the actions of key central banks is helping to drive real estate markets. This positive trend is likely to continue across much of the globe over the next twelve months. But while sentiment is increasingly upbeat, there are a number of risks that should not be ignored including the speed at which  the US Federal Reserve chooses to lift interest rates from current lows and whether the Chinese authorities are able to engineer a soft landing for that economy”, said Simon Rubinsohn, Chief Economist, RICS.

However, two notable emerging economies – Russia and Brazil – continue to display poor readings for both the occupier and investor sentiment indices*, with further declines in rents and capital values expected over the next twelve months. Respondents in these two countries also reported a tightening in credit conditions (this only occurred in four of the 28 countries covered).

The picture is more encouraging across the majority of other markets, most notably New Zealand. Economic growth and easing credit conditions have respondents feeling optimistic about the continued positive performance of the country’s commercial real estate sector.

Europe’s ‘recovery bloc’, Ireland, Spain and Portugal, is expected to see above-average returns with respondents suggesting the latter two markets offer greater value, while real estate in the United Kingdom and the United States should be underpinned by  relatively solid  economic growth.

Confidence and expectations also remain upbeat in Germany and Japan. While the occupier (OSI) and investor (ISI) readings are little changed this quarter for India, South Africa and the United Arab Emirates (UAE), the feedback in all three cases is more positive with regard to the twelve month view.