The slump across global commercial property markets has accelerated since the turn of the year, with the emerging markets in particular struggling under the combination of capital value and rental falls.

The pace of decline in capital values accelerated in the first quarter, while almost every country in the world is reporting a slide in rents, according to the global property survey from the Royal Institution of Chartered Surveyors, released on Tuesday.

Countries across Europe suffered price falls, with particularly significant pessimism over capital values in France, the Netherlands and the Republic of Ireland.

Surveyors expect little easing in the pace of price declines in these markets. However, there was better sentiment in Spain and the UK, where the extent of the market slump means many hope to see a bottom soon.

The UK, in particular, led the rest of the world when the market peaked in the summer of 2007 and is now showing signs of price stabilisation in certain types of defensive well-let property.

The developed regions leading the property cycle generally saw investment and lettings demand fall at a slower pace. Purchasing activity is expected to rise across western Europe and Asia for the first time in over a year. But Germany remains the outperforming market, with expectations towards property values less pessimistic than elsewhere.

However, the Japanese and US markets continued to deteriorate, with virtually all surveyors reporting falling capital values.

There was a marked downturn in sentiment in many parts of central and eastern Europe, the worst performing emerging market region. This belies hopes property in certain emerging market economies would be decoupled from the global downturn. All respondents in Ukraine, Russia, Poland and Croatia reported a fall rather than a rise in capital values.

The decline in capital values is only part of the broader concerns for commercial property, given indications that rents are also falling across the world. Property owners rely on rents to provide income, often linked to their debt, which supports total returns even when prices are falling.

Rents are falling across more than 90 per cent of the 46 countries in the survey, with only Brazil, Saudi Arabia and parts of Africa yet to report declines. Weaker tenant demand has led to faster rises in reported available space, which has compounded the gloomy rental outlook.

Rental expectations are weakest in Singapore, Hong Kong and Ireland, with sentiment in countries in emerging Europe also gloomy, particularly in Hungary, Romania and Ukraine. Available space has risen across every region, forcing agents to offer increasingly larger incentive packages in order to secure lettings.

Oliver Gilmartin, senior Rics economist, said the rental downturn was gathering momentum. “The repricing in developed markets has increased pressure on some emerging locations where on a relative basis assets remain expensive.”

via FT.com / Global Economy – Property slump worsens across the globe.

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