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Rental Occupier Market Sentiment Strengthens In Hong Kong; China Still Weighs On Mood - RICS

Tom Burroughes

9 August 2013

The rental occupier market in Hong Kong ended the second quarter of 2013 in a stronger footing, with occupier demand rising with a net balance of +21 from +6 in the previous quarter.

The RICS Occupier Sentiment Index rise as demand increased while available space for rental properties declined, the survey, conducted by the Royal Institute of Chartered Surveyors, said.

“On the investor side, investor enquiries have changed little although transactions are still expected to decline, with the net balance picking up from -10 to -3. The forward-looking indicator for investment activity continues to look subdued,” the report said.

 The data shows that the weaker economic backdrop appears to be hurting confidence among occupiers in China. Although still positive, the lettings market softened this quarter with the occupier sentiment index “easing notably”, RICS said.

“Meanwhile, the investment market continues to hold up with the RICS Investment Sentiment Index (ISI) indicating the mood among investors remains positive. Both buyer enquiries and expectations of future transaction activity recorded positive net balances. The number of distressed properties coming to the market is expected to continue to pick up in the third quarter. Meanwhile, the demand for distressed property rose more modestly in Q2,” the report said.

On a brighter note, Japan’s market is positive, RICS said, mainly driven by improving economic conditions. The occupier sentiment index recorded a strong reading of +26 in Q2. Significantly, occupier demand stood at a net balance of +51, a level consistent with strong demand for commercial space, it said.

Singapore

In Singapore, the occupier demand returned to positive territory in the second quarter but remains below the rise in available space. Rental values are expected to edge back into positive territory next quarter.

“In Asia, it was a quarter of greater uncertainty, with concerns over the slowing Chinese economy, the overall strength of the US recovery, and regional political risks affecting sentiment in the commercial property market. The slowing growth in the region suggests occupier demand will likely continue to soften in some parts of Asia,” Andy Wu, RICS senior economist.

RICS Occupier Sentiment Index is constructed by taking an un-weighted 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.