Bleak figures from US, European prop

US gross domestic product is expected to contract over the next three to four calendar quarters, with a modest recovery in 2010. A return to annual growth above 2 per cent is unlikely until 2011, Jones Lang LaSalle says.

Officeeffective rents, including the impact of concessions, are falling much more rapidly than most statis¬tics suggest. Rents are already off 5 to 15 per cent in many markets, based on anecdotal evidence.

The firm says an additional down¬side could be substantial in markets such as New York City, where the uncertain future of the financial sec¬tor has shaken confidence. Elsewhere in the Americas, conditions are weakening in some markets, but are generally holding up much better than in the US.

While economic growth has slowed in Canada, with the trade and manufacturing sectors struggling in particular, domestic demand coming from such sectors as mining has held up and office vacancies remain low.

In Europe, the economic down¬turn will be longer and deeper than expected, the firm says. In the UK, where the economy is nearing a tech¬nical recession, 0.5 per cent growth was recorded in the third quarter and the fourth quarter is expected to be at least as bad, given that pessimistic consumers are likely to hold on to their wallets during the holiday sea¬son.

Inflation also remains elevated across the region due to the lagging impact of high food and energy prices on retail prices. Significant job loss¬es are expected following the melt¬down of financial markets, which has led to the restructuring and nation¬alisation of banks and financial insti¬tutions.

These factors are hurting proper¬ty markets across the region, and financial centres such as London, Frankfurt and Paris are the most affected. Central and Eastern Europe are insulated, but not immune, as demonstrated by the sharp equitymarket losses in Russia.

Jones Lang LaSalle says that in AsiaPacific, relatively strong fundamentals, improved current accounts and large foreign reserves should ensure that the region is more resilient to the credit crisis than during the financial crisis of 19971998. Banks are generally well capitalised and have been less exposed to securitised products than those elsewhere.

Emerging markets, primarily China and India, continue to outpace the rest of the region, though growth is slowing there also. In an attempt to avert a major slowdown, China has implemented a raft of policy measures in recent weeks including interestrate cuts, reduced down payments on home purchases and expansion of infrastructure projects. The country's massive foreign exchange reserves will also help it to weather the global economic downturn.