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Asian and Latin American Markets Outperforming Europe and US

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Distressed Property  RICS  Royal Institute of Chartered Surveyors  Repossessed Property Listings 

By - Monday 06 September 2010

Performance in emerging destinations and Asian real estate markets are among the best in the world.

The latest Royal Institution of Chartered Surveyors (RICS) Global Commercial Property Survey has highlighted that destinations within the two regions are comfortably outperforming more developed countries. While occupier markets picked up further during the second quarter of 2010, rents continue to fall in 30 of the 46 countries surveyed.

More countries indicated that lettings demand moved higher compared to the first quarter.

However, the rise in lettings activity is insufficient to exert notable upward pressure on rents in the majority of markets as available space continues to move higher in all but a handful of countries. Speaking on the global market conditions, Simon Rubinsohn, Rics chief economist, points out, "Strong growth in the likes of Brazil, Hong Kong and India, is continuing to boost demand for new space from occupiers as well as encouraging property investment activity."

From a regional perspective, Latin America and Asia are outperforming Western European and US markets. This is consistent with the global economic picture as emerging economies have continued to recover ahead of the more developed economies.

On the occupier side, Brazil recorded the most positive net balance with 85 per cent more surveyors indicating a rise in demand for space.

This demand for office space outside of the eurozone has been increasing on a global scale, with RICS claiming that tough fiscal measures enacted by various European governments are to blame for the stuttering recovery. According to the body, the need for certain countries to reduce national debt is having a profound impact on the appetite of businesses to take up new space.

Distressed Property

The success of the Latin American and Asian markets can be put, in part, down to the emergence of a number of distressed properties in Europe and the US. As banks seek to clear their books and raise extra capital, there has been a surge of new commercial real estate entering the market, with further sales likely to occur. Looking to the future, a number of real estate professionals are predicting that the number of distressed properties coming onto the market in the next quarter will continue to rise.

Respondents to the RICS survey in Portugal and the Republic of Ireland expect to see the fastest growth in activity followed by the US, Spain and Scandinavia. However, there is positive news from Brazil, China, Hong Kong, Canada and India where agents expect distressed sales to continue to decline.

"Growth in distressed listings eased back globally outside of Portugal, Spain and Germany in the second quarter," said Oliver Gilmartin, RICS senior economist. "That said, distressed listings are still rising albeit at a slower pace in much of the rest of Europe and the US. A clear divide appears to be opening up between these markets and the rest of the world."


Another region performing well according to RICS is India.

Confidence towards commercial rents in quarter three 2010 is high with India ranked sixth highest among 46 countries. The RICS Indian Commercial Property Survey for the second quarter of the year suggests the tenant demand will continue to rise at a fast pace - especially across office and retail markets. RICS imply that the driving force behind demand for office property is coming from the potential to secure improver corporate profits.

The upswing in popularity of retail property has come about because of the improved economic climate within the country, making it an attractive market for global retailers as well. In tandem with tenant demand, lettings activity and rental values are also likely to move higher across all three sectors in the third quarter.

Capital values have risen faster across all three sectors. A further increase over subsequent quarters may be witnessed, as demand for commercial property improves and excess supply is absorbed in the market

Prakash Challa, of SSPDL Limited, believes that the general market sentiment in the country has improved. "[The] residential markets have become active [with] good volumes but not much price appreciation," he said.ADNFCR-3415-ID-800051331-ADNFCR

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