Sydney, NSW, Australia

US industrial, office and retail property markets are struggling as the economy decelerates and the resulting uncertainty stalls consumer spending and leasing and investment decisions, according to Colliers International (US) research for the March quarter.

  The research reveals a considerable slowdown in industrial leasing demand, CBD office vacancies up 35 basis points to 12.77 percent, and retailers announcing plans to close stores or at a minimum to curtail further expansion.

   It found since late 2007 threats of recession-like conditions had become increasingly more evident with consumer confidence - a key indicator for the economy in general - registering a 15-year low in April (with the exception of March 2003 and the onset of the Iraq war).

   Senior vice-president and director of market & economic research at Colliers

International USA, Ross Moore, said there was a palpable level of negative sentiment in the warehouse leasing market, while office absorption numbers were considerably below the latest revisions after a near five year run of rising occupancy, and consumer spending had dropped to a snail’s pace with retail vacancy heading towards 10 per cent.

  ``While we had marked down our Q1 projections, this quarter’s office absorption numbers were considerably below the latest revisions.  This suggests the first half of 2008 will be relatively quiet for the lion’s share of U.S. cities,’’ Mr Moore said.

    He said business confidence was unlikely to return before financial markets showed more stability keeping decision makers cautious and reluctant to sign new leases unless absolutely necessary.

  ``All eyes will be on Wall Street and the financial services sector in general to gauge whether mass layoffs will persist and to what extent. The office market is expected to remain in a state of limbo at least through midyear.’’

  The research revealed the US industrial (warehouse) market had weakened considerably during the March quarter with vacancy up, absorption down and new construction levels falling sharply.

  Absorption measured just 7.3 million square feet (approx. 785,000square metres), barely a quarter of the 26.3 msf in the December quarter of 2007 and the 27.3 msf registered in the previous March quarter.

  ``With first quarter data showing a considerable deceleration in both the economy and leasing demand, the US industrial market is sure to post relatively modest results in the coming quarters.

  ``Optimists will point to both monetary and fiscal stimulus which have yet to work their way through the economy, but any evidence of a resurgence in leasing demand will not be evident until late in the third quarter at the earliest,’’ Mr Moore said.

  On the retail front he said a combination of a slowing economy, falling house prices, a significant rise in gasoline prices, a more challenging job market and a deterioration in credit conditions had all united to derail what had been a fairly robust retail environment.

  Colliers International’s Australian Director of Commercial Research, Felice Spark, said while Australia’s economy continued to grow on the back of the resources boom we would be foolish to ignore the US situation.

   ``This data out of the US reflects rather more dire circumstances based on fundamental financial market problems associated with the sub-prime crisis and the ensuing severe credit squeeze that we currently face in Australia, nevertheless there has been some fall out here and we would be remiss to ignore the lessons on show for us in the US at the moment.

  ``However as long as the strong demand from Asian economies for our commodities continues – the Chinese economy continues to grow at more than 10 per cent  - we should weather the storm.

  ``Jobs growth remains strong, unemployment remains at historical lows and our terms of trade, according to the Reserve Bank, are likely to rise by around 20 per cent this year representing a substantial boost to national income.

  ``In short Australian market fundamentals are stronger and more soundly based and therefore businesses and investors can proceed with a far greater degree of confidence than their US counterparts,’’ Ms Spark said.

About Colliers International

Colliers International is a global affiliation of independently owned commercial real estate firms. The organization's 10,092 employees span the world in 267 offices in 57 countries. On a worldwide basis, Colliers manages 672,945,918 square feet, and has revenue of $US 1,620,958,349.

Contact Information

Phoebe Miller
National Communications Manager

Tel: 02 9257 0276

Mob: 0402 547 484

Email: phoebe.miller@colliers.com 

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