CPN - January 2009 - (Page 19) INTERNATIONAL INDUSTRY PULSE The China Effect Fiscal Initiatives Aim to Boost Emerging but Weakening Economy By Coreen Bailor mid global economic conditions of shriveling liquidity, evaporating capital and fading market confidence, China has not gone untouched. The world’s fourth-largest economy, it has realized double-digit growth for the past five years, but its gross domestic product rose just 9 percent during the third quarter of 2008, according to the National Bureau of Statistics of China. Representing its fifth consecutive quarter of slowed growth, that rate marked China’s slowest since 2003. Another prime issue is the state of China’s exports, which dropped 2.2 percent in November from the same period a year earlier, the first slide in seven years. China has proposed a string of initiatives to bolster domestic demand and buffer the impact of the export slowdown.Its most sweeping measure is its recently unveiled economic stimulus plan, which calls for the allocation of about $586 billion to 10 areas like rural infrastructure and transportation over the next two years.“The data shows that the residential market is coming back from the credit freeze, which is good for (the) commercial real estate market,” said Hongbin Zhou,regional director of China for NAI Global. A Rising Rent (Q3 2008 Shanghai grade A office net effective* rental rates) J Year-over-Year Change $90 J 13.47% $80 $70 $60 J $50 7.95% $40 2.89% $30 J $20 J $10 -0.01% $0 Overall Central Puxi Hongqiao Lujiazui $250 Rates per Square Foot per Month (Q3 2008 Shanghai grade A retail rental rates) J Year-over-Year Change 16.20% J J 11.50% J J 14.60% 17.10% J 12.10% Rates per Square Foot Per Year $200 $150 $100 $50 $0 East Nanjing Road West Nanjing Road *average market achievable rent for a lease of an entire floor space in the middle zone of a building, taking into account building efficiency and rent-free periods Source: Cushman & Wakefield Inc.. Middle Huaihai Road Xujiahui North Sichuan Road As China’s economy has slowed, so has its commercial real estate market, which has been expanding from major markets like Beijing and Shanghai to include secondary markets, according to the Urban Land Institute and PricewaterhouseCoopers L.L.C. 2008 Emerging Trends in Real Estate Asia Pacific report.“In China, these include places that many in the West have never heard of, cities such as Changsha, Hangzhou or Chongqing,” the report stated. In general, performance among property sectors has varied, some sectors sustaining less damaging blows than others. Unlike in the United States, for example, the retail real estate sector has been one of China’s better performers.It has the capacity to withstand the turmoil, thanks to vast private consumption, especially in the central business districts, according to Lina Wong, managing director for Colliers International in East China. However, that strength may not last. Already, there have been job cuts.In Hong Kong,for example,the seasonally adjusted unemployment rate rose from 3.5 percent for the period between August and October to 3.8 percent for the period from September to November, according to the Census and Statistics Department in Hong Kong. “2009 probably will see a downturn in retail, when more and more factories are closed and household income drops,” Zhou said. Wong contends that the industrial property market is relatively Continued on page 26 ® Visit www.cpnonline.com/international for more crossborder coverage. GLOBAL SNAPSHOT In This Together Vacancy rates in the United States and Canada increased during the third quarter, up more than a full percentage point since year-end 2007. Overall vacancy in those countries will increase through 2009 as the remaining supply in the pipeline delivers and the demand side adjusts. Indicative of the overall Asia-Pacific office market, vacancy also rose in Tokyo, Hong Kong and Sydney for the quarter. Data for the fourth quarter of 2008 is expected to show a continuing slowdown in Asia-Pacific conditions, including increases in vacancy rates, as well as sluggish rental growth. Slowing demand is responsible for the quarter’s increased vacancy rates in Europe, but weakening economic prospects, high construction costs and lack of debt financing will postpone many of the office projects in the pipeline, and average vacancy rates for Europe should stabilize in 2009. Source: Jones Lang LaSalle Inc. • www.joneslanglasalle.com (Q3 2008 Class A/prime office vacancy rates, including sublease space) Chicago CBD Midtown New York City Mexico City metropolitan area Downtown Toronto Frankfurt metropolitan area* London West End Paris CBD Hong Kong CBD Sydney CBD* Tokyo CBD *all grades 11.0% 9.0% 5.0% 4.1% 12.4% 3.9% 3.3% 1.9% 6.1% 4.1% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 19 0.0% www.cpnonline.com • January 2009 • COMMERCIAL PROPERTY NEWS http://www.cpnonline.com/international http://www.joneslanglasalle.com http://www.cpnonline.com
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