30 APR 2020
Our global commercial property monitors are leading indicators of conditions in commercial property occupier and investor markets around the world.
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With increasingly uncertain economic conditions, findings from the latest Global Commercial Property Monitor record the most negative reading since the first quarter of 2021, with the Global Commercial Property Sentiment Index (CPSI) – a weighted composite measure capturing variables on supply, demand, and expectations – slipping from -6 (in Q2) to -11.
Despite a shift in tone across the commercial property sector, demand for industrial space is still growing, however the pace of growth has slowed down compared to the past.
Demand for office space is also deteriorating with 80% respondents anticipating scaling back in the office footprint over the next year. Two-thirds of the respondents also reported observing a modest amount of repurposing of offices with just over 10% seeing what they describe as a ‘significant’ reshaping of the estate.
Results for the Americas show a fall in headline CPSI during Q3, (from 0 in the previous quarter to -6). The uncertain macro climate has also impacted credit conditions in the region, with further tightening of monetary policy weighing on the market outlook.
Tenant demand for industrial space is, however, still growing, particularly for well-located distribution space in the Americas, which had a particularly robust reading of +32% (in net balance).
Outlook for capital values and rents turns negative with 81% of respondents in the UK feeling the market is in a downturn phase of the cycle.
Occupier demand for office dropped dramatically this quarter, with 90% of respondents expecting businesses to scale back at least some of their office footprint over the next twelve months. Momentum in the industrial sectorhich though remains in positive territory, has started to decline noticeably, falling from +61% last quarter to +21%.
The headline number masks significant divergence at a country level which reflects the worsening picture in China (-40) and Australia also down to -5 but more positive results for Singapore and India.
Demand for industrial space has turned negative heavily influenced by China market (net balance -45%) but the rest of the region still see rapid increase of demand to occupy industrial space.
Middle East & Africa
Feedback from MEA suggests a solid market backdrop, with responses from professionals in the market continuing to refer to an increase in commercial real estate activity, whereas the majority of respondents globally view their local market to be in a downturn phase.
Saudi Arabia and the UAE lead the standout performance of the region amongst others covered in the report, with further positive sentiment of +7 and +10 (CPSI) in the region. Sentiment from Nigeria also saw improvement, with the Q3 figure of +22 representing the strongest reading on record.
Commercial Property Sentiment Index dropped further to –13 this quarter in Europe, with 70% of respondents (up from 52% last quarter) viewing market conditions to be consistent with a downturn at a regional level.
Deteriorating credit conditions, accompanied by falling investor demand leads to -79% (headline net balance) for credit conditions recorded this quarter, representing the weakest return for this reading since 2014.
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