Cushman & Wakefield, Inc. has issued its outlook editions of its global Economic Pulse report series showing a significant improvement over last year in economic indicators -- with positive impacts expected for business and commercial real estate -- in regions around the world, despite continuing concerns about high unemployment, fragile recovery conditions and credit availability in some markets. The annual outlooks paint an increasingly positive 2010 picture for economies and commercial real estate markets in Asia, Europe and the Americas.
A brief summary of each regional Economic Pulse report is outlined below.
For the U.S., the stabilization of labor markets, growth in temporary employment services, and recent rises in personal income, sales and production, all point to an economy that has shifted from contraction to expansion during the second half of 2009, most likely in the fourth quarter.
In the U.S., the strength and durability of the recovery will depend on demand growth and the reaction of businesses to that demand growth, in addition to improvements in the availability of pricing and credit. According to the report, U.S. job growth could potentially increase payrolls on the order of 1.5 million jobs for the year which would still be 5 million jobs off the 2007 peak.
Full recovery for commercial real estate, on a national basis, however, will be delayed, due to the long-term nature of the transactions in the industry. Vacancy is likely to rise in most cities during 2010, even as employment increases. The outlooks for the rest of the Americas are mixed, but generally cautiously optimistic. Canada faces many of the same challenges as the US, but the outlooks for Mexico and Brazil are somewhat brighter.
Consumer confidence has returned to the Canadian marketplace despite a stall in job growth in December 2009, when the overall economy shed 2600 jobs. Employment has stabilized, but remains down since the October 2008 peak. So, while the overall unemployment rate remains flat at 8.5%, the economy is expected to perform much better in 2010, with moderate growth.
Canadian office markets will continue to see weak demand in the near term, and vacancy rates in most markets will rise, particularly in the first half of 2010. Still, some markets are experiencing unexpected demand resilience, with a slowing of sublet space being returned to market. Central Calgary and Toronto will continue to see available space rise faster than other major markets, which is attributable to the completion of new office towers, not weak demand fundamentals
This year, the Mexican economy is projected to grow much faster than in 2009 with current estimates for growth at about 4.0% to 5.0% based in part on government and private sector funding for bicentennial celebrations. Overall, there is likely to be more investment activity in 2010 than in 2009. The decline in the value of the peso by nearly 30% in the past year against the dollar and even more against other currencies has helped make Mexico an attractive investment location.
This peso decline and a general global recovery should help the hospitality sector and the industrial sector which makes Mexico an attractive location for manufacturing and transshipment reinforcing Mexico's position as an important production location. The combination of a recovering US economy and the cheaper peso is expected to boost the Mexican real estate market in 2010.
From a general business perspective, Brazil is seen as a top destination for foreign investment and appears to be poised for an outstanding year. Commercial real estate remains a major area of opportunity in the main CBDs, but given the extremely high foreign interest to invest, as well as strong interest from local players, cap rates are starting to compress and may rapidly compress through 2010.
The main risk is for Class A properties in Sao Paolo, where a large amount of new construction will enter the market in the next three years, which could translate in