World real-estate markets

The report says the half-way point of 2009 is an appropriate time to measure how far the economy has advanced on its path towards recovery and the resulting impact on the real-estate market, the recovery of which typically lags behind that of the economy by 12-24 months.

In the January edition of "Global Market Perspective", Jones Lang LaSalle said the recessionary trend would probably continue through the middle of the year, with prospects for recovery increasing later this year or early next. As was stated then - and repeated in subsequent reports - the firm believes recovery will depend upon a restoration of confidence, improved credit flows, stabilisation of the balance sheets of the world's major banks, the success of fiscal and economic stimulus packages around the world and the elimination of unexpected shocks from the global financial system.

The latest report says in several parts of the world, a number of these preconditions for recovery have gradually been met. Although national economies are still encumbered by high levels of debt and reduced gross domestic product, a path toward real-estate recovery is becoming more visible through various liquidity measures.

Jones Lang LaSalle's "Global Real-Estate Health Monitor" shows while the overall level of economic activity remains recessionary, many indicators are stabilising and others are deteriorating at a slower pace. Some, such as the Organisation for Economic Cooperation and Development's leading indicators, are improving.

Despite these encouraging signs, Jones Lang LaSalle says employment figures could continue to decline well into next year. As long as employment remains weak, upward pressure on commercial property vacancy rates will remain. Investment values, particularly for properties with short lease profiles, will also remain under pressure until investors see clear and strong signs of employment growth.

Economic growth in the major economies is predicted to begin turning positive during this quarter. After being lowered from February through April, the consensus forecast for next year was raised last month, reflecting fading concerns about an all-out collapse of the financial system.

However, more recent data fanned the flames of concern once again, the firm says. Even though the global economy is expected to recover later this year or early next, the risk of a very slow growth rate or a "double dip" recession lingers.

Jones Lang LaSalle says the economic environment dictates both the amount of building space corporations require and the rental rates they can pay to occupy that space. Following the economic weakness of since last year, take-up or net absorption levels remain at historically low levels in many markets as occupiers remain financially hindered or are restructuring rapidly in the light of falling revenues and head counts. Echoing the economic conditions, the pace of real-estate demand varies across the globe.

Across most of Asia, rental rates continued to decline in the second quarter, but in most markets the extent of decline was less than in the first quarter. Against that backdrop, corporate motivations are changing in Asia.

A recent survey of Jones Lang LaSalle's major corporate clients in the region revealed roughly 44 per cent of respondents planned operational growth both this year and next, while another 44 per cent planned to consolidate. The rest are seeking merger-and-acquisition opportunities and outsourcing real-estate portfolios to reduce costs.