Global Markets Move Towards Sustainable Recovery

Cushman & Wakefield today issued its global Economic Pulse reports providing a 2011 outlook for commercial real estate in the Americas, Europe and Asia Pacific, as each region moves towards a sustainable recovery.

A brief summary of each report is outlined below. For full copies of the Economic Pulse reports, visit Cushman & Wakefield's Knowledge Center at


U.S.: The U.S. economy appears poised for major acceleration in employment growth. Labor markets are at or near a tipping point, which will take them from moderate to strong growth, adding some 300,000 jobs per month by the fourth quarter of 2011.

The projected acceleration in job growth will have a major positive impact on commercial real estate. Office vacancy rates in CBD and suburban markets will improve substantially should employment growth take off. The industrial market - where the vacancy rate has already eased down by 0.5 percentage points since the first quarter of 2010 - will also tighten further, especially in an environment that has seen little new construction in the past year. Retail real estate markets, as well, will benefit from GDP and consumer spending increases, likely seeing lower vacancy rates. As demand picks up and markets tighten, it follows that rents will stabilize in 2011, and may begin to rise in some markets.

Canada: Canada's strong banking sector helped to propel it into recovery in the first quarter of 2010, and though growth slowed, by year-end, it regained momentum thanks mainly to higher commodity and energy prices. By the end of 2010, Canada had recovered more jobs than had been lost during the recession, with its unemployment rate sitting at 7.6 percent.

With a class-A office vacancy rate at 7.1 percent, Canada is entering an expansionary cycle at its tightest point in history. In 2011, positive demand is projected for most markets, with central areas remaining stronger than suburban markets. The pace will be moderate, with the exception of Downtown Toronto, which is expected to continue experiencing high demand levels, driven primarily by the financial services sector.

Brazil: With an unemployment rate of 5.7 percent, increased domestic spending and strong foreign demand, Brazil's GDP growth reached 7.3 percent in 2010. The country's commercial office market was one of the best performers in the world last year, with strong demand, healthy absorption and rising rents across all major metropolitan areas. The trend is expected to continue in 2011, as economic growth remains healthy.

Mexico: Recovery in the U.S. drove much of Mexico's growth in 2010, while domestic demand remained sluggish. While the country's real GDP grew an estimated 5.0 percent, uncertainty on behalf of businesses contributed to unemployment remaining essentially flat at 5.2%.With growth accelerating as the U.S. economy improves, stronger business confidence, along with increased investment and hiring, are expected in 2011. This will help domestic demand recover as the year progresses.

The Mexico City office market, the country's largest, saw modest improvements in 2010, with rents continuing to decline. Vacancy declined slightly in 2010, and stronger employment growth will lead to further improvements in vacancy and a stabilization of rents.


Europe's recovery in 2010 was largely due to exports, government spending and stimulus measures, but 2011 may see a broader base for growth, with a higher contribution from business investment - and eventually, consumer spending - making a case for a more sustained recovery. However, growth will be very different country-by-country, and a key driver for some would be continued growth in Asia, which would help to sustain the strong bounce seen in manufacturing in a number of markets.

Central and Eastern Europe look set to continue to strengthen in 2011, though average growth rates will still be way short of pre-recession highs. Twelve of the 13 Central and Eastern European markets analyzed are forecast to outperform the Western average in 2011, with Russia, Poland, Slovakia, Kazakhstan and Turkey the brightest spots. In Western Europe, Germany is leading the way, while Sweden has also seen a strong return to growth, Finland and Switzerland are ahead of expectations and Norway and the UK are expected to outperform in 2011. Risks remain in the region however, from higher inflation hitting margins and spending power - particularly in the East - ongoing banking sector problems, government debt and the need for further austerity measures, with Greece and Portugal forecast to see recession this year as budgets are cut further.

Despite this, the European real estate market is expected to be more active in 2011, if still heavily polarized. There is enough economic activity and confidence to drive an increase in occupancy, but not enough to turn a supply-led upturn into a demand-driven cycle. The office cycle is likely to improve more than the retail, logistics and hospitality cycles in many areas, though the recovery will be driven more by property quality than sector. The investor market is expected to improve, with further strong demand for income and for low-risk products, and bank and loan restructuring possibly proving to be the catalyst for a marked increase in investment supply and activity.


Asia Pacific experienced its second year of recovery in 2010, with nearly every country in the region posting strong results. Though China has played a major role, the recovery has been broad-based. Real GDP growth surged across the board in the first half of 2010, but moderated to more sustainable rates in the second half of the year. Real GDP growth for 2010 was 6.9 percent, with Singapore, China, Taiwan and India becoming the fastest-growing economies in the region.

Notably, domestic demand has been a driving force of growth, driven by rising employment and incomes, as well as government stimulus. Strong intra-regional trade has been an additional driver fueling export activity.

The region's economic resurgence in 2010 helped the office market stage a major recovery, making Asia Pacific the first region to report an improvement in market fundamentals, with declining vacancies and increasing rents in most markets in 2010. Financial companies made a strong comeback, accounting for the majority of all new transactions in 2010. Information technology firms also expanded their footprint.

Investment activity in the region continued to rebound, with $256 billion in sales volume in 2010, just shy of the all-time high of $268 billion in 2007. While office properties continue to attract the most attention, investors have stepped up their purchases of other properties types, indicating the region's growing appeal to the global investment community. Prices for class-A properties in core markets increased 30-40 percent.

The outlook for Asia-Pacific is strong due to several factors, including continued strong domestic demand, China's position as a key driver of regional demand and favorable demographics and continued public investments. All of this has the potential to support real GDP regional growth of 5 to 6 percent over the next two years. While risks loom - including an overly aggressive fiscal and monetary adjustment and stronger economic growth in the U.S. potentially fueling an exodus in capital flows in the region - Asia Pacific's solid macroeconomic backdrop should sustain the commercial real estate sector.