The United States and Europe are both set to fall into a shallow industrial recession this year, thanks to a cocktail of higher interest rates and energy prices and weak global demand.
Sally Li
In Asia Pacific and in Europe, total employment growth in major cities over the period 2023-27 is likely to lag behind office employment. But in the US we project slightly slower growth in office jobs than in total employment.
Several cyclical and structural headwinds have been a drag on eurozone industry recently and are tilting near-term risks to our outlook to the downside.
The bank loan disposals over the past several months are evidence of the impact from tighter credit conditions on CRE. Elevated interest rates and CRE price declines are forcing banks to assess, and possibly offload, some of their CRE debt.
Office-based sectors have been the key driver of economic growth across APAC’s key cities over the last 10 years. We forecast that will continue, generating many additional jobs.
Most metros are forecast to see low but positive total job growth through 2027, although the majority will incur slight job declines in the second half of 2023 to Q1 2024, in line with the US.
We think the stabilisation in global house prices is likely to prove short-lived. Already, the factors that prompted it, such as a fallback in mortgage rates, are wearing off.
We expect the intensifying headwinds from higher interest rates, tightening lending standards, and weakening economic conditions to result in a near-term pricing correction and reduced returns for US commercial real estate.
We think the stabilisation in global house prices is likely to prove short-lived. Already, the factors that prompted it, such as a fallback in mortgage rates, are wearing off. Meanwhile, other drivers such as valuations, the resetting of fixed-rate mortgages to higher rates, and forecast rises in unemployment all point towards further price declines.
After suffering an extended period of steep declines, we believe that the downturn in semiconductor sales may finally be nearing an end.
Recent bank funding turmoil is likely to lead to tighter lending conditions in commercial real estate markets in the Asia-Pacific region.
We now expect eurozone all-property capital values to fall by 10% this year, after a 3% correction last year, and see slower growth in 2024. This is a sharper decline than we saw during the global financial crisis (GFC)
We have modelled the regional economic implications of a range of policies that governments could impose to support the transition toward net zero. Under each scenario the future economic outlook of cities and regions will vary, with some places benefitting, while others will undoubtedly lose out.
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Despite the near-term challenges, the outlook for Asia construction over the next 15 years looks strong. In our recently released Global Construction Futures report, we find that the Emerging Asia region will be the fastest growing construction market over the next 15 years.
In 2020, electricity represents around 21% of global industrial energy consumption. By 2050, this reaches 65% in our Net Zero Transition scenario.
Demand for capital goods will benefit from the large-scale investments required for countries to achieve Net Zero.
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While China’s sooner-than-expected reopening has led some to pencil in a more robust rebound in 2023, we are more cautious. Our 4.5% growth forecast for 2023 remains below consensus.
