2012 will be a reverse image of 2011, and a tale of two halves for the global economy and the world’s commercial real estate markets, according to global real estate services firm Cushman & Wakefield’slatest MarketView report. While there was a healthy start for 2011, rising uncertainty surrounding the resolution of sovereign debt issues in Europe and the U.S. led to a slowdown in the economy and commercial real estate activity in the second half of the year. The exact opposite performance is expected for 2012, with a sluggish beginning giving way to improvements in the latter half of the year.
“Despite uncertainties, there remains a well of pent up demand in most nations,” said Glenn Rufrano, President and Chief Executive Officer of Cushman & Wakefield. “As the year progresses and uncertainty subsides, improving economic conditions will support a boost in commercial real estate activity.”
The main economic and market drivers for the year will be continuing strength in Asia from local demand growth, steady growth in the Americas and weakness in Europe, as sovereign debt issues continue to take a toll. The approach each region takes to reducing its debt issues will be a critical determinant of its economic performance.
Six key trends will define the global real estate market in 2012:
1. Linked Economics But with Regional Differences
As the global financial system continues to become more integrated and trade flows expand, the macro linkages between economies will increase. However, the three main global regions’ very different public debt profiles will result in very different prospects for 2012.
2. Timing: First Half Second Half
While the second half of 2012 is expected to be much stronger for the global economy and real estate markets, prospects vary by region.
For the global economy to improve there needs to be movement toward resolution of debt issues in Europe and the U.S., or at the very least, rising confidence that a solution will be achieved.
4. Real Estate Opportunities
The evolution of the global economy will likely provide opportunities in 2012 for both real estate investors and occupiers. Deleveraging will lead to opportunity for investors, as European financial firms come under pressure to dispose of assets to increase capital, with real estate likely to be among those assets sold.
5. Improving Real Estate Fundamentals
Despite regional differences and early year weakness, the global office leasing market will experience declining vacancy rates and rising rents in 2012, although the pace will vary by region. While the softer global economy is likely to lead to sluggish performance of industrial markets in Asia and Europe, the greatest opportunity is foreseen in North America, where supply growth has been limited and rising demand may lead to higher trade volumes and industrial output.
6. Active Investment Markets
2011 saw a 14 percent increase in global investment sales to $808 billion. For 2012, a 7.5 percent increase is anticipated, for a total of $867 billion in sales. More product will be brought to market as institutions are in better positions to dispose of assets. While sales are projected to be flat in Europe – at approximately $198.5 billion – and even in Asia – at $374 billion – investment activity in the Americas is forecast to increase 25 percent over 2011 levels, to approximately $295 billion.
Cushman & Wakefield is the world’s largest privately-held commercial real estate services firm. The company advises and represents clients on all aspects of property occupancy and investment, and has established a preeminent position in the world’s major markets, as evidenced by its frequent involvement in many of the most significant property leases, sales and assignments. Founded in 1917 it has 235 offices in 60 countries and more than 14,000 employees. It offers a complete range of services for all property types, fully-integrated on a global basis, including leasing, sales and acquisitions, debt and equity financing, investment banking, corporate services, property management, facilities management, project management, consulting and appraisal. The firm has more than $5.5 billion in assets under management through its wholly-owned subsidiary Cushman & Wakefield Investors. A recognized leader in local and global real estate research, the firm publishes its market information and studies online