Cushman & Wakefield Economic Pulse Americas Feb / Mar 2011

8/7/2019 Cushman & Wakefield Economic Pulse Americas Feb / Mar 2011

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ECONOMIC

PULSE

ECONOMIC PULSE | EbrUary/MarCh 2011

US Lo Mkets appocing Tipping Point. In is popul ook out ow tends nd ds emege in

societ, Mlcolm Gldwell points out tt tee is n impotnt pscologicl component to te emegence o

tends. Wen cetin ke indiiduls o tendsettes dopt eio like mode o dess, otes ollow suit

nd demnd o poduct cn suddenl eplode s it ises in populit. Te point t wic te tend sits

om eing cuiosit to ull-edged d is clled te tipping point.

Someting simil ppens in n economic ecoe. Emploment gowt, specifcll, oten sits om wek

to stong witin sot peiod o time. business eio, wic is undestndl cutious duing

ecession nd in te el stges o ecoe, tends to sit pidl. at some point, usinesses egin to ie

ecuse te go om eing woied out losses o wek demnd to eing woied out te possiilit o

losing sles nd missing out on potentil pofts. Te sit, wen it occus, does tend to come suddenl.

Te esult is pid cceletion in emploment gowt, wic ten genetes ige income gowt nd

leds to sp cceletion in economic ctiit.

a rEPOrT ON ECONOMIES IN ThE aMErICaS

aND IMPaCTS ON COMMErCIaL rEaL ESTaTE

Cuan & Wai, Inc.

1290 Anu t Aica

Nw Y, NY 10019-6178

T (212) 698-2502

www.cuanwai.c

ThE TIPPING POINT WhY CommerCIAl reAl esTATe mArkeTssTANd To hAve A good YeAr

OUTLOOK 2011

ECONOMIC

PULSE



2ECONOMIC PULSE | EbrUary/MarCh 2011

a C U S h M a N & W a K E I E L D r E S E a r C h r E P O r T

T h E T I P P I N G P O I N TECONOMIC

PULSE

In te economic ecoeies o te 1970s nd 1980s, te sit to epnding emploment egn lmost ectl

t te sme time tt te oell ecoe eced ottom. but in te ecessions o te lst 20 es:

–1990-91, 200 nd 2007-09 – te econom tuned ound long eoe lo mkets did. In 1991, teecession ended in Mc 1991, ut emploment did not ottom-out until eu 1992, lmost e

lte. In 2001, te lg ws een longe: 21 monts wit jos fnll eginning to incese in august 2003 een

toug te ecession ofcill ended in Noeme 2001. In te cuent ecoe, polls ottomed in

Deceme 2009, si monts te te ofcil end o te ecession in June 2009.

In ot te 1991 nd 2001 ecoeies, emploment gowt, wen it did fnll egin, stted o slowl.

but in ot ecoeies tee cme tipping point wen emploment gowt suddenl suged. To illustte

tis we emined emploment gowt in te 12 monts te polls eced ottom nd comped tt

to te gowt in te susequent 12 monts. In ec o te lst two ecoeies, emploment gowt eced

tipping point nd cceleted spl in te second e te te ottom. We eliee tis is likel to ppen

gin in te US in 2011. Poll emploment eced ottom in Deceme 2009. In te susequent

12 monts te econom dded sligtl moe tn one million jos, o ougl 93,000 jos pe mont.

but te econom ppes poised o mjo cceletion in emploment gowt in te coming e.

In bt t 1991

an 2001 ci,

pynt wt,

wn it i fnay

bin, tat

wy. But in bt

ci t

ca a tippin pint

wn pynt

wt uny

u.

TabLE 1: EMPLOyMENT GrOWTh IN rECOvErIES (Montl ege)

suc: Us Buau lab statitic

300

250

200

150

100

50

0

T h o u s a n d s o f P e s o n s

143 149

First Year Second Year

268

214

93

1992 2003 2009






PULSE

Te pecusos o gowt e lling into plce, s indicted :

• Layos are decreasing. Te nume o people fling o unemploment ec week ell spl just eoe

emploment gowt took o. between Jul nd Deceme 1992, te ou-week moing ege o te

nume o people fling o unemploment dopped om 446,000 to 350,000. In 2003, te nume o fleso unemploment ell om 435,000 in apil to 360,000 in Deceme. Tod, te nume o clims flings is

lso plunging, om 490,000 in august to 410,000 in Deceme. Genell, dop elow 400,000 is

consistent wit cceletion in emploment gowt, nd te econom is just out tee.

• Consumer spending is accelerating. In te 2002-03 ecoe, etil sles, djusted o intion,

incesed 2.9% in 2002, 3.9% in 2003 nd 4.2% in 2004. In 2010, el etil sles incesed 4.2% te

lling 4.5% in 2009, nd in te fnl si monts o 2010 sles climed t 7.5% nnul te. Tis is citicl

ecuse emploes need to see gowt in demnd nd e confdence tt it will continue eoe te

commit to moe iing.

• Temp hiring is booming. Tempo elp seices tend to epeience emploment gowt soone nd

ste tn te est o te econom. businesses tend to e cutious el in ecoe nd will ie temps

until te e confdent in te outlook. Temp iing is cuentl te stongest it s ee een. In te

15 monts since Septeme 2009, temp elp emploment s incesed nel 500,000 jos, te

stongest 15 mont peiod in te pst 20 es. Wit demnd ising we epect usinesses will sit om

iing temps to iing pemnent emploees in te coming e. Tt sit is likel to ppen in 2011.

In ec o te lst two ecoeies, temp iing peked just eoe totl jo gowt cceleted.

TabLE 2: MONThLy avEraGE EMPLOyMENT GrOWTh: 2010-2011 (Tousnds o Pesons)

Buin tn tb cautiu ay

in a cy an

wi i tp

unti ty a

cnfnt in t

ut. Tp

iin i cunty

t tnt it a

bn.

325

275

225

175

125

75

25

-25

Q1-10 Q2-10 Q3-10 Q4-10 Q1-11- Q2-11- Q3-11- Q4-11-

19.3

231.4

91.8

224.9

253.9

281.6

304.8Forecast

-15.8

suc: Us Buau lab statitic, my’ Anaytic






PULSE

Tese tends suggest tt US lo mkets e t o ne te tipping point. nd will likel moe om

modete gowt to stong gowt in 2011. as te ct on pge 3 sows, montl ege emplomentgowt is pojected to incese om out 92,000 jos pe mont in te fnl qute o 2010 to sligtl

moe tn 300,000 pe mont in te out qute o 2011. b te end o 2011 te US econom sould e

dding jos t n nnul te o moe tn 3.5 million. Tt would e te stongest emploment gowt since

te fnl qute o 1997.

US rel Estte Mket Implictions. Te pojected cceletion in US emploment gowt in te coming e

s mjo implictions o te US commecil el estte mket. all mjo sectos: ofce, industil, etil nd

multi-mil will eneft. I we ssume tt te 3.2 million jos pojected to e dded in te net 12 monts

e distiuted mong industies in te sme popotion s cuent emploment, te US will dd ppo-

imtel 660,000 jos in ofce-using industies, 345,000 jos in te mnuctuing nd distiution sectos nd

350,000 in etil.

Ofce markets e likel to impoe sustntill. In US centl usiness disticts (CbDs), te cnc te

eced pek o 15.0% in te fst qute o 2010 nd declined modetel in te susequent tee

qutes, ending te e t 14.4%. an dditionl 660,000 jos in tis secto will cuse cnc to dop

spl. Te lst e in wic te US econom dded tt mn ofce-using jos ws 2005. Ten, te CbD

cnc te dopped 2.0 pecentge points nd te suun cnc te ell 2.3 pecentge points.

Suppl cnges tt e wee ougl te sme s in 2010, so tt is not likel to e mteil impct.

I w au tat

t 3.2 iin jbpjct t b

a in t nxt

12 nt a

itibut an

inuti in t

a pptin a

cunt pynt,

t Us wi a

appxiaty

660,000 jb

in fc-uininuti, 345,000

jb in t

anuactuin an

itibutin ct

an 350,000 in tai.

TabLE 3: NaTIONaL vaCaNCy raTE: CbD OICE aND INDUSTrIaL

17%

15%

13%

11%

9%

7%

5%

1995 1996 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20101997

CbD Oice Industilsuc: Cuan & Waf rac






PULSE

Tis suggests tt CbD nd suun cnc tes e likel to ll sustntill i emploment gowt

comes nwee close to te cuent pojection.

Industrial markets. Emploment in te mnuctuing nd distiution sectos s not incesed

345,000 jos since 1997 t te eginning o te Intenet oom. Tt e lso sw te stt o peiod o

sp inceses in new constuction, pticull in te weouse secto. a totl o 110 million sque eet

o spce ws completed in 1997. Tt is in stk contst to te cuent mket in wic tee ws onl

15 million sque eet o new constuction. Een wit tt temendous new suppl, te industil secto s

wole sw te cnc te decline om 8.4% to 7.3% in 1997.

Oell, te industil cnc te s declined 0.5 pecentge points since te fst qute o 2010. ute

sustntil declines e e likel in te stong gowt scenio we e pojecting in 2011, especill in n

enionment wit little new constuction.

Retail markets. Te oell emploment gowt pojected o 2011 comes in n enionment o

cceleting economic ctiit. GDP nd consume spending e ot nticipted to ccelete om 2.8%

nd 2.7% (out qute to out qute) espectiel in 2010 to 4.4% nd 3.9% in 2011. Tis is likel to

led to signifcnt impoement in etil mkets. Lowe cnc tes e nticipted in te etil secto in

te coming e lgel ecuse o stengtening consume demnd.

Rental rates. aege sking ents o ille spce continued to decline in 2010 in ot ofce nd

industil mkets. but te te slowed to lmost noting s te e pogessed. b te end o 2010, CbD

ofce sking ents wee 0.2% elow te leel o e elie nd industil ents wee down 6.0%. butout qute ents wee ctull oe te tid qute in industil mkets, on ege coss te

count. In climte o cceleted economic gowt nd declining cnc tes, it is likel tt ents will

stilize in 2011 nd m egin to ise, pticull in mkets tt e tigte tn te ntionl ege.

Oell, 2011 is likel to mk tuning point o ents in te US commecil el estte mket o te

ntion s wole.

US Conclusions. Te US econom is t o e ne tipping point in te gowt ccle. Emploment gowt

is pojected to tiple tis e wit moe tn 3 million jos pojected to e dded to te wokoce. bot

GDP nd consume spending gowt e pojected to ccelete spl.

In commecil el estte enionment ccteized limited constuction, tis sp cceletion in

demnd is likel to e elt impct on cnc nd ents. vcnc tes e epected to decline wile

ents will t te e lest stop declining nd in some mkets tun up. Tougout te ameics, te outlook

o te el estte mket is epected to e one o impoement.

oa, t

inutia acancy

at a cin

0.5 pcnta

pint inc t ft

quat 2010.

Fut ubtantiacin a y

iy in t tn

wt cnai

w a pjctin

in 2011, pciay

in an ninnt

wit itt nw

cntuctin.






PULSE

CaNaDa

businesses in Cnd woked to fnd tei ooting in cllenging glol econom in 2010. a elt nkingsecto elped popel ecoe in Cnd, nd pus GDP gowt to 6.1% in Q1 2010. Te lion quickl tuned

into lm, owee, nd te ecoe lost tction in te sping nd summe o 2010, slowed wekening

glol economic undmentls. b eend, wit commodit nd eneg pices siting upwds, Cnd’s

econom once gin stted egining stem. Oell, estimted GDP gowt o 2010 will e out 3.1%.

om jos pespectie, Cnd peomed supisingl well in 2010, ecoeing moe jos te end o te

e tn d een lost duing te ecession. Te unemploment te stood t espectle 7.6%.

Cnd’s economic peomnce ied widel coss te count, nd tis is likel to e te cse in 2011.

GDP gowt o Cnd net e is pojected to nge om 2.4% to 3.0%. hige gowt will e

epeienced in esouce-ic poinces locted in Westen Cnd. Centl Cnd will lso see impoed

stengt, dien pimil demnd o goods nd seices om sout o te ode.

Centl Cndin ofce mkets peomed e well in 2010, wit demnd in centl Toonto leding te

w. Te pim die in Downtown Toonto ws te fnncil seices secto. vncoue nd Montel

lso epeienced centl e demnd esilience. Clg, uelled mid-e olt t eduction nd

stengtening oil pices, sw uge esugence in demnd.

at te ntionl leel, te Clss a cnc te coss centl mkets onl ose to 7.1% in te fst l o 2010

om low o 3.2% t te end o te tid qute o 2008. Tis mens tt Cnd is t its tigtest point in

isto enteing n epnsion ccle. Notl, centl e deelopments e eing discussed in ou mjomkets due to ot demnd needs nd undeling cnc conditions.

In 2011, piti

an i pjct

t at,

wit cnta aa

win

tnt tanububan at.

TabLE 4: CaNaDIaN OICE MarKET: vaCaNCy raTE vS. NEW SUPPLy (all Clsses)

20%

18%

16%

14%

12%

10%

8%

6%

4%

2%

0%

20

18

16

14

12

10

8

6

4

2

0

8.8%

6.1%6.6%

11.5%

17.3%

8.2%

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

v a c a n c y r a t e

N e w

s u p pl y ( mi l l i on of f )

suc: Cuan & Waf rac, Canaa






PULSE

Suun ofce mkets, wic e muc moe closel connected to US usiness ctiit, did not e nel

s well s centl mkets in 2010. In mn, signifcnt mount o spce ws etuned to mket downsizing o eiting US compnies.

In 2011, positie demnd is pojected o most mkets, wit centl es sowing moe stengt tn

suun mkets. howee, te pce will e modete, wit te eception o Downtown Toonto, wee

demnd will emin t o ne epnsion leels. Suun mkets will see slowe gowt ccelete s

te e pogesses.

LaTIN aMErICa

ate contcting in 2009 in esponse to te US ecession, tis egion cceleted spl in 2010 s glol

demnd incesed. a slowdown to moe modete, ut still stong gowt te is pojected o 2011.

Ltin ameicn ntions m eneft om te det polems in Euope nd te Middle Est ttcting

oeign inestment tt suppots gowt.

braZIL. bzil’s ntionl deelopment nk, bNDES, s poided unds to impoe instuctue nd o

smll- nd mid-sized compnies to incese tei poduction cpcit. Esing o cedit conditions s lso

stimulted gowt in etil sles nd consume spending. Tese inceses e lso een tiggeed n

incese in consume confdence due to educed unemploment, wic closed te e t te o 5.7%.

bzil’s GDP gew stong 7.3% in 2010, uoed incesing oeign demnd nd ising domestic spending.

a slowdown to 4.5% is pojected o 2011 s domestic demnd gowt modetes wile oeign demnd

emins stong.

Intion is likel to incese, wit commodit pices climing. In 2010 intion eced 5.9% nd m

ccelete ute in 2011. Tis pompted te centl nk to ise inteest tes duing 2010, wic will

contiute to te gowt slowdown.

as inteest tes incesed, so did te ecnge te o te bzilin rel. Since bzil elies eil on oeign

mkets, stonge cuenc s educed epot pospects nd ised domestic intion. We epect te

goenment to old inteest tes t nd pemit te cuenc to gdull weken in 2011.

Dilm rousse o te Ptido dos Tldoes (PT) won te Octoe 2010 pesidentil un-o election nd

took ofce in Jnu. Se will ce seel economic issues in 2011, pticull te ecnge te nd

intion. Uncetint out te policies o te new pesident e d n impct on fnncil mkets, ut tus

te tnsition s een smoot.

bzil’s commecil ofce mket emined one o te est peomes in te wold in 2010 wit stong

demnd, elt soption nd ising ents coss ll mjo metopolitn es. Tis tend is epected to

continue in 2011, s economic gowt emins elt. Wit emploment pojected to incese 1.6%, demnd

o spce will continue to clim in 2011 oosting soption nd keeping ents ig.

Bazi’ ccia

fc at

ain n

t bt p

in t w in

2010 wit tn

an, aty

abptin an

iin nt ac a

aj tpitan

aa. Ti tn i

xpct t cntinu

in 2011, a cnic

wt ain

aty.






PULSE

Cushman & Wakefeld i nwn t w- a an inuty nw a.

Tu t iy tiy, accuat, i-quaity ac pt n t ain

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upat aaiab n a ua bai, Cuan & Waf a pi cutiz

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Cushman & Wakefeld i t w’ at piaty- ccia a tat

ic f. Fun in 1917, it a 230 fc in 60 cunti an tan

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piay icipin: Tanactin s ic, incuin tnant an an pntatin in

fc, inutia an tai a tat; Capita mat, incuin ppty a, intnt

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For more inormation about C&W Research, contact:

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A it .

Pint in UsA.

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1290 Anu t Aica

Nw Y, NY 10019-6178

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Cuan & Waf snnnbic gan Cainia, Inc. – lic. #01823455

Ti pt a bn ppa y inatin

pup. It nt pupt t b a cpt ciptin

t at pnt cntain in ti atia.

T inatin n wic ti pt i ba a bn

btain uc w bi t b iab, but w

a nt inpnnty if uc inatin an w

nt uaant tat t inatin i accuat cpt.

MExICO

Meico’s econom ecoded stong gowt in 2010 wit el GDP gowing n estimted 5.0%. Muc o tegowt ws dien te ecoe in te US wit domestic demnd emining sluggis. businesses e still

cutious in te uncetin economic enionment nd less willing to tke isks. Tis contiuted to te

unemploment te emining essentill t t out 5.2% in 2010.

Te econom is epected to continue to impoe in 2011 wit gowt cceleting s te US econom impoes

Tis sould led to ige usiness confdence nd moe inestment nd iing. Te esult is epected to e

ecoe in domestic demnd s te e pogesses nd note e o solid economic epnsion.

Te Meico Cit ofce mket, te lgest in te count, sw modest gins in 2010 wit sligt decline in te

cnc te, ut ents still declining. In 2011, we nticipte tt stonge emploment gowt will led to n

impoement in te cnc te nd stiliztion in ents. Oell, te mket is epected to continue

looking up in 2011.

ameics Conclusions. Te ecoe is ee nd is likel to get stonge s 2011 pogesses. Te entie egion

will eneft om stonge gowt in te US, ut ll te mjo counties in te ameics will e in ull-edged

economic epnsions in 2011. Tt cn onl elp conditions in el estte mkets. helt emploment

gowt will contiute to declining cnc in most mkets, on ege nd led to n uptun in sking ents

sometime in te net 12 to 18 monts. We e led seeing ige ents in seel mkets. Te tipping

point, i it isn’t ee et, is e close.

Cushman & Wakefield Economic Pulse Americas Feb / Mar 2011

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Transcript of Cushman & Wakefield Economic Pulse Americas Feb / Mar 2011