Global Picture Offers Hopeful Glimmers: Cushman & Wakefield

Jun 15, 2009
By: Paul Rosta, Senior Associate Editor, Commercial Property News

Signs that the global economic slowdown is easing could point to recovery starting late this year or in early 2010, according to new reports by Cushman & Wakefield Inc.

Still, the firm’s analysts warn against premature celebration. Referring to the United States, the report on North America states, “The best that can be said about the current environment is that it won’t get any worse, and is more likely to show improvement sometime in late 2009.” That said, the U.S. economy is showing signs of improvement on several fronts. The spread between the three-month LIBOR rate and Treasuries has shrunk from 4.57 percent last October to below 1 percent at most recent report. The housing market may be bottoming out, and consumer confidence is edging up. And surveys from such sources as the Federal Reserve and Moody’s economy suggest that the wave of pessimism among businesses is also subsiding.

Meanwhile, rising oil prices are benefiting several North American markets, particularly Houston, Mexico City and Alberta, Cushman & Wakefield notes. Among Mexico, Canada and the U.S., Canada is looking the strongest, thanks to a stable banking system, government stimulus and rising health care investment. Those conditions bode well for the nation’s real estate market; for example, government requirements for 3 million square feet of office space in Ottawa during the next several years will probably make that market one of the world’s tightest.

Cushman & Wakefield’s analysts also report seeing light at the end of the tunnel for Europe: “We have passed the nadir for the economic cycle in most countries, as the global trade slump eases and as policy measures to ward off financial market collapse take effect.”

Nevertheless, researchers also foresee another year of slow growth and the possibility of some countries backsliding. Greece, Norway and France will fare best among the Western European countries, whose aggregate gross domestic product is projected to decline 3.7 percent this year. In Eastern Europe, where GDP will slide 3.8 percent, standouts will include Poland, the Czech Republic, Slovakia and Bulgaria.
Regarding specific property sectors, the report speculates that the European office rents may soon be halfway through a projected 25 percent peak-to-trough decline in pricing. Moreover, today’s reduced office development pipeline could cause space shortages by 2011. On the investment front, transactions should pick up this year after investment sales volume tumbled 42 percent in the first quarter compared to the fourth quarter of 2008.

In Asia, China will lead economic expansion as government stimulus efforts and stabilizing demand for the nation’s exports boost its GDP growth to 7.5 percent this year. India, Indonesia, Vietnam and the Philippines are also expected to enjoy positive GDP. Japan’s GDP, by contrast, is on a path to shrink 6.1 percent, hampered by weak consumer spending and rising unemployment. Cushman & Wakefield projects that demand for office space by multinational corporations in Asia could start to rebound during the first quarter of 2010.

Citing figures from Real Capital Analytics Inc., the report notes that investment sales volume fell precipitously in Beijing, Hong Kong, South Korea, Shanghai, Singapore, Sydney and Tokyo from the first quarter of 2008 to the first quarter this year. However, investment sales advisers a report increased demand in some markets. And the standoff in one crucial area, yield pricing, may be easing. A gap between buyers and sellers that once reached 30 percent to 40 percent is now more likely in the 5 percent to 15 percent range--“narrow enough for a good (broker) to bridge a deal,” the report notes.