HONG KONG--(BUSINESS WIRE)--The commercial real estate community is predicting grim conditions for Hong Kong’s property sector over the next year. The Global Commercial Property Monitor released quarterly by RICS (Royal Institution of Chartered Surveyors) revealed troubling Q1 2016 statistics. Survey respondents expressed a negative sentiment for the coming 12-month period, although the poor outlook is concentrated in the retail sector. The RICS Occupier Sentiment Index (OSI) is at -24. The OSI constructed by taking an unweighted average of readings for three series relating to the occupier market.
The industry’s low expectations have persisted for three quarters in Hong Kong’s occupier market. The latest survey revealed that tenant demand decreased, with the sharpest declines experienced in the retail sector and modest declines in the industrial segment. Survey respondents expect rents to fall by 3.6% over the coming year. Prime retail unit rates are expected to see the sharpest falls; rates in the Tsim Sha Tsui and Causeway Bay retail districts were forecasted to fall by 14% over the next year. Only the office sector experienced an upswing in rentals in the past quarter, as well as a positive outlook for the upcoming 3-12 months.
The Hong Kong Investment Sentiment Index (ISI) remained firmly in negative territory, at -24%, in Q1. Investor demand for office sites continued to rise while demand for industrial and retail units fell. A particularly sharp fall in capital values over the coming year is predicted in the retail sector, and prices across prime and secondary retail space are forecasted to fall by 9.6% and 7.8% respectively.
“As expected, the Hong Kong property community remained cautious; there has been no cause for optimism,” said RICS Hong Kong External Affairs and Public Concerns Committee Member Mr Frank Wong. “Rental rates are expected to continue sliding, especially in retail, and until the market stabilises, we anticipate further declines and a pessimistic attitude industry-wide.”
In China, conditions in the commercial property market appear to have stabilized in Q1 as a result of the Chinese government’s measures to support its economy. This has also caused increased interest from foreign investors. Like Hong Kong, China’s tenant enquiries in the office sector grew steadily and rents are projected to continue rising. The outlook across many Asian markets remains cautious. Malaysia, Indonesia and Singapore are seeing a fall in demand from occupiers and investors.
The Global Commercial Property Monitor is a quarterly market sentiment survey. All survey respondents are commercial real estate market practitioners. The sentiment index introduced by the RICS economic department allows us to track the trend of commercial property. The full RICS report can be downloaded from < rics.org/economics >.
Notes to Editors:
RICS Occupier Sentiment Index (OSI): OSI is constructed by taking an unweighted average of readings for three series relating to the occupier market measured on a net balance basis; occupier demand, the level of inducements and rent expectations.
RICS Investment Sentiment Index (ISI): ISI is constructed by taking an unweighted average of readings for three series relating to the investment market measured on a net balance basis; investment enquiries, capital value expectations and the supply of distressed properties.
Net Balances: Net balance percentages, or scores, are calculated by subtracting the numbers of respondents reporting ‘down’ from the number who reported ‘up’.
About RICS
Confidence through Professional Standards
RICS promotes and enforces the highest professional qualifications and standards in the development and management of land, real estate, construction and infrastructure. Our name promises the consistent delivery of standards – bringing confidence to the markets we serve.
We accredit 118,000 professionals and any individual or firm registered with RICS is subject to our quality assurance. Their expertise covers property, asset valuation, real estate management; the development of infrastructure; and the management of natural resources, such as mining, farms and woodland. From environmental assessments and building controls to negotiating land rights in an emerging economy; if our members are involved the same professional standards and ethics apply.
We believe that standards underpin effective markets. With up to seventy per cent of the world’s wealth bound up in land and real estate, our sector is vital to economic development, helping to support stable, sustainable investment and growth around the globe.
With offices covering the major political and financial centres of the world, our market presence means we are ideally placed to influence policy and embed professional standards. We work at a cross-governmental level, delivering international standards that will support a safe and vibrant marketplace in land, real estate, construction and infrastructure, for the benefit of all.
We are proud of our reputation and work hard to protect it, so clients who work with an RICS professional can have confidence in the quality and ethics of the services they receive.
About RICS Asia
RICS Asia supports a network of over 20,000 individual professionals across the Asia region with an objective to help develop the land, property and construction markets in these countries, by introducing professional standards, best practice education and training. We promote RICS and our members as the natural advisors on all property matters. We also ensure that services and career development opportunities are provided to members.
RICS Asia region serves local member associations located in Brunei, Japan, Malaysia, Singapore, Thailand, The People’s Republic of China, Hong Kong SAR, Taiwan and South Korea. It also has members working across the region such as Bangladesh, Bhutan, Burma/Myanmar, Cambodia, Indonesia, Kiribati, Laos PDR, Macao SAR, Mongolia, Nepal, North Korea, The Maldives, The Philippines, Timor East and Vietnam. For more information, please visit: www.rics.org.