Next year is expected to be a turning point for the economy and the commercial real estate industry, according to Cushman & Wakefield’s Global Economic Pulse Forecast.
While 2013 will get off to a slow start, the stage has been set for a significant turn-up in market sentiment by year end, setting the stage for a strong global rebound in 2014 and beyond.
“We believe in 2013 there will be more clarity to political and economic challenges plaguing the global economy,” said Glenn Rufrano, president and chief executive officer of Cushman & Wakefield.
“As we see solutions evolve, confidence should return, demand will accelerate and lead to a much healthier economic climate.”
“2012 started off with high hopes that we would overcome the challenges faced by the global economy and growth would accelerate, but difficulties intensified and the expected improvement got pushed further into the future,” added Ken McCarthy, chief economist for Cushman & Wakefield.
“Nevertheless, the fundamental drivers continue to point to stronger growth, with acceleration most likely later in 2013.”
Across the Americas, the coming year is expected to be one of transition from modest to strong growth. The U.S. economic recovery has been the slowest recovery on record.
Weak growth has largely been a result of consumers holding back on spending, for reasons including subpar employment growth and a lack of significant recovery in the housing sector.
Another obstacle to growth has been uncertainty, with issues ranging from the U.S. election, the U.S. budget deficit and debt ceiling and the euro zone. However, these uncertainties are expected to be resolved in 2013.
Once decisions are made, healthy fundamentals – including near record-level corporate profits, household debt at a two-decade low and low interest rates – will set the stage for stronger growth in the future.
“Once the fog of uncertainty begins to lift, the underlying health of the regional economies, most notably in the U.S., will emerge and drive growth higher,” said Maria Sicola, executive managing director and head of research for the Americas at Cushman & Wakefield.
Canada’s economy is slowly emerging from the doldrums, though overall growth is expected to remain weak due to the slow recovery f the U.S. and ongoing competitiveness challenges.
The Brazilian economy, which experienced a sharp slowdown beginning in late 2011, is expected to accelerate sharply in 2013 due to a combination of strong monetary and fiscal policy stimulus.
Mexico’s economy slowed and is expected to remain that way until early 2013, mainly due to sluggish growth in the U.S. Slow U.S. demand was offset by strong domestic growth, which is forecast to slow, but Mexico’s economy is expected to continue to outperform the U.S. and Canada.
Real estate implications differ throughout the Americas, with the U.S. and Canada flat, and Brazil and Mexico improving. Continuing low levels of construction will lead to broadly positive leasing fundamentals. The technology and energy sectors will drive growth, as well as the health care sector.
Europe has failed, at least up until now, to shrug aside its woes, with not only weaker sentiment and output, but also a steady fall in growth expectations.
The key point to undermining confidence has been the handling of the euro zone sovereign debt problems, and the resulting loss of confidence from global players.
However, the first building blocks of a sustainable solution appear to have been put into place, in the form of a more robust firewall between countries and between the banking and public sector, and with the start of serious negotiations on greater fiscal and banking cooperation and control. There is still a long way to go to resolve the underlying debt crisis, but the ECB has given Europe some breathing space to work and the environment is getting better.
Economic expansion will continue across Asia Pacific through 2014; however, the outlook is less buoyant compared with recent years.