RICS report reveals global demand for commercial property

World demand for property is pushing up rents and attracting heavy investment in commercial building projects, the latest RICS Global Property Survey has found.

Cross border investment is at an all time high, the report on the first half of 2006 revealed. However much of the increased activity is outside the UK, where purchasing activity was unchanged on the previous year at around £24bn in the first half of this year.

Foreign investments activity is increasingly targeting Europe and Asia, said the report. Demand for commercial real estate in the booming economies of India and China was found to be particularly strong.

Some heat has gone out of the central and eastern European economies “but underlying conditions are still robust”, the report found.

The first half of 2006 saw a record amount of global direct real estate investment - $290bn (£153bn), a rise of 30% on the previous year. Cross border investment now represents 44% of all property investment, up from 34% in the first half of 2005.

RICS chief economist Milan Khatri said: “In the first half of 2006 the global search for yield stepped up a gear. Risk premiums continue to fall despite tighter global monetary conditions. However, the coup in Thailand and political problems in Hungary serve to highlight the fact that issues of risk in emerging markets have not disappeared completely, and that some investors may not have taken this on board when venturing into less established markets.

He added that prospects for real estate markets globally remained solid despite concerns that a "bubble" may be building in certain regions. “Low interest rates are ensuring that a heavy flow of money continues to pour into property, with renewed declines in global bond yields likely to reinforce investment demand in the latter half of 2006."