India plummets but China holds firm

The property market in India has been hard hit by the global economic downturn but China is showing more resilience says the latest RICS Global Commercial Property Survey.

India has experienced a significant commercial property downturn in Q3 2008. Rising interest rates, higher inflation and a continuing lack of liquidity is impacting significantly on business confidence. 45 percent more Chartered Surveyors reported a fall in occupier demand compared to just 6 percent in the last quarter. The balance of surveyors reporting investor purchases plummeted from a flat zero balance to -73. However, commercial property in China has, to date, remained relatively firm in the face of a global economic downturn. Most of the Chinese indicators remain in positive territory, with both supply and demand holding up and expectations generally upbeat. 14 percent more Chartered Surveyors expect an increase in floor space to be let and sold throughout China in the coming months while 18 percent more surveyors are reporting a rise in capital values

Emerging Europe witnessed the biggest slump in capital values out of all regions with 46 percent more Chartered Surveyors reporting a fall than a rise compared to 1 percent reporting a rise in Q2. Around 80 percent of the banking sector is owned by Western European banks and the supply of foreign currency lending to local subsidiaries has been severely restricted. 56 more Chartered Surveyors recorded a fall than a rise in investment demand compared to 9 percent in Q2. The hardest hit country is Russia with the net balance of surveyors reporting falls in investment demand jumping from a positive 16 percent to -79.

In the UK, the ongoing drag from the credit crunch continues to depress sentiment - especially in the Central London Office market where recent worry over the health of the hedge fund industry is only adding to a sense of pessimism. This is in stark contrast with Germany where demand and confidence is still high despite dropping capital values. In Germany the net balance of Chartered Surveyors reporting a rise than a fall in tenant demand is currently at 18 percent compared to a depressed -52 percent in the UK.

There is little good news from the US where the property market continues to suffer from a lack of liquidity. The proportion of surveyors reporting falls in pipeline developments has jumped from 48 percent to 79 percent.

RICS chief economist, Simon Rubinsohn said: "The worsening economic climate is taking its toll on the commercial property markets in most parts of the world and the credit crunch has now extended its grip into emerging markets. Large interest rate cuts by central banks should eventually provide some support. However, with liquidity still tight and tenant demand softening further pressure on the commercial sector is inevitable in the near term."