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S&P global property indices rebound in Q2

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Commercial property markets are showing signs of a recovery following sharp rises in the S&P Property and Reit Indices in the second quarter, according to a report from Standard &am

Commercial property markets are showing signs of a recovery following sharp rises in the S&P Property and Reit Indices in the second quarter, according to a report from Standard & Poor’s Index Services.

After a disappointing Q1, in which the S&P Global Property Index continued its downward spiral falling by 19.81 per cent, property markets across the board have rebounded sharply with the index posting an increase in Q2 of 37.9 per cent.

As with Q1, emerging markets were ahead of their developed counterparts, with the S&P Emerging Market Property Index increasing by 56.2 per cent.

Regionally, the S&P Asia Pacific Property Index was in the lead with an increase of 42.7 per cent compared to North America (30.7 per cent) and Europe (27.0 per cent). Each index outperformed its S&P Broad Market Index counterpart.

The decline in vacancy rates, particularly in Asia, access to capital allowing companies to shore up balance sheets and pay down debt, and improved liquidity thanks to governmental intervention and revived credit flow, have all been highlighted as key drivers behind the improved performance of property and Reit companies.

Despite the astounding returns, analysts are quick to point out that any recovery will be slow and painful with salient issues such as rising unemployment, lack of investor confidence, fears of inflation and substantial debt obligations still affecting all sectors of the capital markets. In addition, despite the strong rebound of many securities, the report reveals there are still many companies fighting to stay afloat, such as Germany’s Vivacon’s four subsidiaries, which recently filed for insolvency due to high vacancy rates.

‘The second quarter saw a turnaround in the fortunes of property and Reit companies with spectacular returns across the board. However, we are not over the recession and widespread concerns around the long-term liquidity of the sector remain. The threat of rising unemployment, inflation, and widespread investor uncertainty are affecting Reits in particular,’ says Alka Banerjee, vice president of S&P Index Services.

In stark contrast to the previous quarter, developed market Reits were among the strongest performers. Singapore, which recently experienced a much anticipated ease in credit conditions, posted a gain of 63.1 per cent and Austria, Finland, Greece, Hong Kong, Italy, Japan and Norway all increased by over 40 per cent. However, emerging market Reits continued to lead the way with India and China posting returns of 98.1 per cent and 76.2 per cent respectively.

‘It is not all doom and gloom and there is no denying the resilience of the industry. We hope that Q3 and Q4 will see a continuation of this quarter’s positive returns," adds Banerjee.

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