joint promise to aggressively attack the credit crisis, and

"The most important thing that we can take away from last week and this weekend is the show of decisive, coordinated policy action," he says. "Central banks and governments in the most affected areas were taking steps in terms of bailouts, recapitalizing banks and revitalizing lending markets, but it wasn't working to a large extent at getting money to flow through the system. The joint policy is restoring some faith in the system."

Indeed, the foreign markets seemed to greatly improve from last week's drops, with Britain's FTSE 100 up 4.6%, Germany's DAX up 6.8%, France's CAC-40 up 5.8% and Asian markets (except for the Nikkei, closed for a holiday) also posted gains in the past 24 hours. Even the US markets rebounded, with the Dow Jones breaking up through 9,000 points this afternoon.

However, there will not be a quick fix for commercial real estate, says Breslau. "Certainly, the effects of the last few weeks and months will create downward pressure on demand, particularly those in the finance sector in the US, Europe and Asia," he says. "It's clear that the finance industry will go through a dramatic transformation. Even non-financial companies are likely to see a slowdown, as growth plans struggle with credit drying up. We might still see some growth in the second half of 2009, but there won't be a real estate recovery until at least 2010."

Indianapolis-based Bob Bach, SVP and chief economist for Grubb & Ellis, agreed in a report released today on the US office market. "Market fundamentals trail changes in employment, which itself is one of the last economic indicators to respond to a changing cycle," said Bach in the report. "Expect office market fundamentals to deteriorate through 2009 with a recovery likely to begin in 2010. Tenants will be able to drive a hard bargain if they are confident enough in their own profit outlook to take advantage of the opportunities in the market."

However, Bach said in his report that the hammer hasn't hit yet, with office market conditions only moderately softening in the third quarter, hitting a vacancy rate of 14.3%. New York City has the lowest rate at 6.2%, while Detroit is the highest at 23%. Absorption is down, and subleasing has increased, he said, but development has halted to allow some markets to catch up to the projected slowdown. "The lack of credit, spending cutbacks by businesses and households, and the vaporizing of trillions of dollars in stock wealth and home equity are conspiring to drive the economy into a deeper recession."

Instant Insights /

Reports: Recession, Then Recovery by 2010

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