News

A happier new year for the global economy?

Many economists entered 2009 predicting a very challenging year for economic performance around the globe, with recessionary trends continuing in the developed world at least through mid-year.

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Main topics:

• A recession continues around much of the globe with few predicting recovery before late 2009 or early 2010-- with recovery largest dependent upon increased liquidity and the success of massive stimulatory efforts by central banks and governments.
• Vacancies in the commercial real estate sector are on the rise and rents expected to decrease through 2010 as economies from Europe, Asia Pacific, and the United States start to show reduced demand for goods and services.
• 2009 will have some potentially hopeful signs as residential housing becomes more affordable and mortgage rates fall.  This will allow banks to revalue existing residential securitized debt and begin to lend again.
• Pricing acceptance appears to be surfacing in the United Kingdom, while in Asia Pacific, transactions have declined significantly.  In the United States, investors and lenders alike are experiencing a "sorting out" period.
• In 2009, banks will be forced to negotiate and restructure debt for borrowers as equity in assets erodes.
• Japan and Australia are starting to see increasing investor interest in corporate debt and equity and should soon see the same in commercial real estate, while opportunities to invest in prime distressed assets at significantly discounted prices also exist across the Middle East region.
• Healthy corporations with well-managed or serviced commercial real estate functions will be active in the market over the next 24 months to align business needs with favorable market conditions.
• Investment activity is expected to increase as corporate downsizings put forth real estate ripe for disposition.
• Conditions appear to be improving in the credit markets as corporate credit markets narrow their spreads.  However, companies funded by private equity may be forced to confront huge amounts of debt maturing in 2009 and 2010, with some facing bankruptcy.  As a result, financial institutions may be preparing reserves to cover losses.