No Material Downturn Expected For The Global Economy This Year


The US is not headed for a recession this year and there will not be an out of control crash landing in China according to CBRE’s latest global economic forecasts.

CBRE’s Global Head of Research, Nick Axford, said the firm’s house view was that the global stock market ructions experienced in January as a result of concerns about China and the US had been an overreaction.

Speaking at CBRE’s 20th Melbourne Market Outlook presentation, Dr Axford said while there were clearly risks in the market “nothing leads us to believe that we’re going to see a material downturn in the global economy during the course of this year”.

“From our point of view we don’t think that the US is headed into a recession this year. China is slowing undoubtedly but that’s by design - there are structural changes occurring which are very necessary. But there’s nothing going on that makes us think there’s going to be an out of control crash landing,” Dr Axford said.

He noted that recent uncertainty about US interest rates had been very positive for property, with investors attracted to the combination of a real asset with a relatively high, contractually guaranteed income.

But what will happen when interest rates rise? Dr Axford said CBRE’s view was that real estate was reasonably fully priced and there not much more scope for further yield compression.

However, he added that the outlook varied from market to market and there was a clear distinction between the outlook for Pacific and the majority of the other markets in Asia Pacific.

“We see both Asian and global money continuing to target the Pacific market both this year and into the next,” Dr Axford said.

Indeed, CBRE’s Head of Research, Asia Pacific, Henry Chin said Australia was one of only two Asian Pacific markets, alongside Japan, that were expected to experience further yield rate compression this year.

This would be bolstered by continued offshore investor interest from China and from other Asian markets such as Singapore, Hong Kong and Korea - with CBRE’s latest Investor Intentions survey highlighting that APAC investors wanted to increase with investment in Australia’s office, retail and hotel sectors.

CBRE’s Head of Research, Australia, Stephen McNabb said an attraction for investors in the office market was the strong net absorption figures recently recorded in markets like Sydney and Melbourne.

Last year, about 120,000sqm of net absorption was recorded in Melbourne boosted by tenant migration to the CBD. Moving ahead, CBRE’s forecast is for 60,000sqm of net absorption per annum, which will support some rent growth this year strengthening growth in 2016 and 2017.

Another driver for the market will be an increased focus on workplace strategy, which Mr McNabb described as a “very strong, emerging theme”.

“It’s about attracting and retaining employees and landlords will have to react to that and upgrade existing assets to help tenants meet those needs going forward,” Mr McNabb said.


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