Sentiment towards global real estate sector has fallen emphatically among both investors and occupiers following the spread of the Covid-19 pandemic, said RICS, a global professional body for standards in land, property and construction in its Global Commercial Property Monitor. 

 

Globally, confidence among occupiers has deteriorated in the last three months in 33 of the 34 countries surveyed, with the same proportion also now showing negative readings, it stated.

 

RICS’ Occupier Sentiment Index (OSI), a gauge of sentiment amongst occupiers, has slipped to -61 this quarter in the UAE from -41 in Q4 2019, which is the weakest reading since 2010, indicating to a further deterioration in occupier demand. 

 

However, Saudi Arabia, even after seeing a sharp decline in sentiment due to the global pandemic and low oil prices weighing on the outlook, still saw a softer reduction in occupier confidence compared to other countries globally, with the OSI falling from -10 in Q4 to -19 this quarter. 

 

The same trend is evident among investors too. Confidence has fallen in all countries. 

RICS’ Investor Sentiment Index (ISI), reflecting sentiment among investors, is now in negative territory in majority of countries surveyed, with the UAE recording -41 on the index. 

 

Respondents in the country noted a sharp reduction in both domestic and international investor enquiries over the quarter. 

 

Saudi Arabia saw a slip in investor confidence as well, with the overall investor demand declining slightly in retail and office sectors and the ISI contracting to -2 this quarter, compared to +15 in Q4 2019. 

 

However, this was not the case for industrial properties, with investor enquiries remaining steady in this sector over the quarter. 

 

Both investors and occupiers fear that we are not yet over the worst when it comes to the impact on the real estate sector. 

 

Looking at the expectations for the next twelve months, in the case of rental values, UAE expects a decline of 5% in headline rents, with secondary retail rents expected to see the sharpest decline. 

 

Saudi Arabia, on the other hand, records highly varied rental growth projections across the sectors, with the most acute rental decline in secondary retail spaces by 4%. Prime industrial sector, however, sees a rise of 2% in rents in the next twelve months.