by Christa DiLalo, Associate Market Director, Research Services
One of the factors that has a major impact on commercial real estate occupancy costs is the economic performance of the country in which an occupier is located. In general, stronger economic growth is associated with rising rents and tighter real estate markets, while weak economic performance can put pressure on landlords as soft demand forces them to lower rents.
The International Monetary Fund publishes a regular forecast of economic growth for countries around the world. The latest report, published in April, has reduced expected economic growth in most countries across the globe.
These downward revisions point to opportunity for occupiers. As economies under-perform expectations, demand for space is likely to grow more slowly than anticipated and landlords will be faced with a weaker market than expected.
The countries with the weakest performance this year are expected to be Russia and Brazil which are in the midst of major recessions. Most advanced economies are now forecast to grow more slowly than anticipated earlier this year.
Conversely, countries with the strongest growth are expected to be in Asia, led by China, India and the ASEAN nations (Indonesia, Malaysia, Philippines, Thailand and Vietnam).
Many things impact rental rates in local markets, but in general, a slower economy will present more opportunities for occupiers than a strong one.
Christa DiLalo is an Associate Market Director and works with the Principal Economist to prepare cutting-edge research about commercial real estate on a national level. Christa also conducts primary research, data-driven analysis, and forecasting for the office and industrial sectors of Northern and Central New Jersey—one of the largest suburban markets in the country—as a critical member of the firm’s New York Tri-State Research Services group.