Global property clock ticks up to 8 oclock

Investor sentiment has improved dramatically around the world in the last six months with the opinion that global property markets are now in an advanced stage of recovery, according to latest property research undertaken by Colliers International.

Latin America, Asia and the Pacific are leading the way; however hesitancy in the United States and Western Europe still remains due to the sovereign debt crisis and continued economic weakness.

Regional responses in the Colliers International Global Investor Sentiment Survey for Q3 2010, have resulted in the average global property clock now positioned at 8 o’clock, up significantly from the global average of 5.30 in Q1 2010. In the Pacific region (Australia and New Zealand) the current clock is sitting at 7 o’clock with most investors predicting it will move forward to 8 o’clock by early 2011, in a clear upswing.

The responses indicate that most markets globally are on the upswing and are characterised by rising demand, falling availability and vacancy and rising headline rents.

“Most of the survey’s top line findings have demonstrated a growing optimism in the global real estate market,” said Felice Spark, Colliers International Director of Research.

“While current sentiment varies by region, the large majority of respondents felt the market would still be on the upswing one year from now. Optimism in the market is reinforced by the nearly three-quarters of respondents saying a double dip recession is unlikely.”

John Marasco, Colliers International Managing Director of Investment Services and Chairman of Colliers International Global Investment Services, said most investors who want to expand their portfolios indicated they would do so in their own countries, with Australia no exception.

Seventy per cent of Pacific investors expressed a desire to buy property in the next 12 months, particularly in the office and retail sectors, while only eight per cent were looking to buy offshore.

“From an office market perspective, demand in Sydney and Melbourne is extremely strong. In fact, Melbourne office overtook its northern counterpart for the first time in the three surveys conducted.

“Also of note, investor interest in purchasing retail property has increased dramatically which is not surprising given the reemergence of the REITs this year the retail sector and an influx of wholesale funds.”

Ms Spark said interest in investment in the retail sector has risen substantially from 10 per cent in Q1 2010 to 25 per cent just six months later in Q3 2010.

Over the past 12 months there was a total of $811.44 million retail property sales, with almost 45 per cent to offshore institutions.

“Interest in Sydney retail in particular is noted by a significant number of investors. Just last month Westfield opened the first stage of its $1.2 billion centre in Sydney’s Pitt Street Mall. The opening closely followed that of Lend Lease and Fortius Funds Management’s $1 billion Mid City Centre – located just opposite Westfield,” she said.

A greater proportion of Pacific investors (at 59 per cent) indicated that they are considering selling property in the next 12 months versus the Q1 2010 response (41 per cent).

Mr Marasco said this could reflect better pricing conditions now in the Pacific markets.

Ms Spark said across the office sector in the Pacific region, the largest group of investors (22 per cent) believes the bottom has already passed in regards to prime net effective rents.

“The next largest group (19 per cent) believe office rents will bottom out by Q4 2010.

“In markets such as Sydney and Melbourne, rents are already perceived to have passed the bottom while further rental softening may still be expected in Brisbane and Perth.

“There was more a mixed view in industrial markets, with the largest proportion of investors (24 per cent) expecting prime rents to bottom out this quarter, Q4 2010. Retail rents are expected to take a little longer to pass the trough, possibly by Q2 2011.”

In secondary markets, rents are expected to bottom out at a later stage generally across all sectors, with rents predicted to bottom out in the office sector first, early next year in Q1 2011, followed by industrial and retail in Q2 2011.

When asked if the Pacific region was heading for a double-dip crisis, the majority of investors (73 per cent) said no, indicating the strong positive sentiment amongst Pacific investors for our local market.

“Cushioning our property markets are strong economic fundamentals, underlying confidence and demand for resources, as well as strong commodity prices,” Mr Marasco said.

“That said, the European sovereign debt crisis has caused share market volatility which appears to have subdued investor sentiment in the region somewhat.

“We are seeing interest in purchasing property off-shore remain steady, but still low, reflecting a desire of most Pacific investors to maintain a predominantly domestic portfolio and continued wariness of overseas markets.

“If they are looking overseas, China is being heavily favoured as an investment choice across all property sectors, particularly office and industrial property. Brazil, Spain and the USA are also markets of interest.”

Other key regional findings of Colliers International’s Q3 2010 Global Investor Sentiment Survey include:

In Western Europe, 60 per cent of respondents now intend to make cross-border investments, a notable increase from the figure of 30 per cent for Q1 2010.
A significantly greater proportion of US investors (65 per cent) indicated they are considering selling property over the next 12 months versus the Q1 2010 response (23 per cent).
73 percent of Asian investors expect to expand their property portfolio in the next 12 months, up from 65 percent in Q1 2010.
Among investors from the Middle East and Africa, 62.5 percent stated that they would be looking to actively reduce risk levels, with 25 percent indicating they would look to increase the diversification of their portfolio, implying an overall degree of risk management.
Across Central and Eastern Europe, the range of locations being targeted by investors was quite diverse, although Warsaw remains the most popular destination, notably for office product. Other popular targets quoted were Kiev, Prague, Moscow and Bucharest.
Among Latin American investors, 69 per cent of those surveyed reported they will not reduce their risk levels.

Survey respondents included major institutional and private investors with holdings of US$710 billion and represented a cross-section of property investors across the globe. The survey’s primary purpose is to better understand global investor attitudes in the current marketplace at a global and regional level, including investors’ outlook for the coming 12 months.

For further information please contact:
Sarah Stewart, National Manager | PR & Communications
Corporate Marketing & Communications, Colliers International
Tel: +61 2 9257 0200
Email: Sarah.Stewart@colliers.com

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Global property clock ticks up to 8 oclock