Global Commercial Property Slump Worsens

The Financial Times reports that the world-wide slump in commercial property markets has intensified since the turn of the year, with many markets struggling under the combination of capital value and rental falls.

From FT: The decline in capital values is only part of the broader concerns for commercial property, given indications that rents are also falling across the world. Property owners rely on rents to provide income, often linked to their debt, which supports total returns even when prices are falling.

Rents are falling across more than 90 per cent of the 46 countries in the survey, with only Brazil, Saudi Arabia and parts of Africa yet to report declines. Weaker tenant demand has led to faster rises in reported available space, which has compounded the gloomy rental outlook.

Rental expectations are weakest in Singapore, Hong Kong and Ireland, with sentiment in countries in emerging Europe also gloomy, particularly in Hungary, Romania and Ukraine. Available space has risen across every region, forcing agents to offer increasingly larger incentive packages in order to secure lettings.

Oliver Gilmartin, senior Rics economist, said the rental downturn was gathering momentum. “The repricing in developed markets has increased pressure on some emerging locations where on a relative basis assets remain expensive.”

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