Tenant’s Guide, North American Markets
Overview
As we begin a new year, U.S. and Canadian businesses will once again face a very challenging economic landscape with the twin worries of a still tepid economy here in North America, and the unknown effects of the ongoing European debt crisis. Global growth has already been scaled back as recession like conditions had become evident in a number of European countries at the tail end of 2011. This will almost certainly delay business leaders from pushing forward with any expansion plans until more is known about the breadth and depth of a European recession and any possible bank failures or credit difficulties.
The good news for tenants in the market for space this year is that leasing markets in North America will remain fairly benign with still significant discounted rents and an abundance of for lease space in all but a small number of submarkets. Canadian markets are certainly further along the real estate cycle, but for North America as a whole, leasing markets are at best treading water and are unlikely to tighten in any significant way in 2012 and quite possibly 2013.
Barring the unexpected, business conditions in North America should be marginally better in 2012 than in 2011, but for many industries the economic landscape will seem as daunting as it has for the past three years. The worldwide trend towards lowering debt (a process referred to as deleveraging) by governments and individuals alike will be a contracting force impacting many countries. This is sure to act as a significant drag on economic growth, both here in North America and countries around the world. This will not escape the notice of business leaders and real estate decision makers and will again stifle leasing markets. Varied sources of instability are also making businesses more nervous about making long term commitments. While Cresa doesn’t have the inside edge on what surprises might be coming our way, what we can say with almost complete certainty is business leaders will again be confronted by a large array of “shocks to the system” whether they be domestic or foreign. As a result, most businesses are expected to stay largely cautious as they continue to be challenged by a very uncertain and volatile economic landscape. Add in the prolonged uncertainty and further erosion of confidence in the U.S. political system and it is not unreasonable to foresee a further delay in expansion and hiring that would ignite leasing markets and put a floor on lease rates. Decision makers will continue to err on the side of caution until there is a significant increase in job growth, most likely well into 2013.
Business Drivers
For business leaders the fragile nature of the U.S. economy will continue to be paramount. A reasonably strong finish to 2011 should lead to a relatively good start for 2012, but with consumers largely tapped out and governments at all levels making spending cuts it is highly unlikely the U.S. economy will grow by more than 2.0 percent – just marginally better than 2011. Themes that dominated in 2011 are again expected to be front and center in 2012. Relatively anemic job growth, high oil prices, deleveraging and a still shaky housing market are all expected to be stiff headwinds for much of the year. Monthly job gains are expected to mirror 2011 with approximately 150,000 workers added to payrolls per month leaving the unemployment rate stuck between 8.0 to 9.0 percent. Industries adding jobs include technology, social media, energy, healthcare, and education. One key source of weakness, however, will be finance which has shown little growth over the past few years and is unlikely to do so in 2012.
To read the complete North American Market overview, please visit our Tenant’s Guide page. There you will also find guides for individual markets, from Albany, NY to Washington, DC.
This entry was posted on Wednesday, January 18th, 2012 at 9:00 am and is filed under Tenant's Guides. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.