As Torto Wheaton's report points out, the situation in the US is relatively straightforward: "A shrinking economy and a contracting job market translate into weakening property fundamentals." The report, authored by Torto Wheaton economist Arthur Jones, contrasts that situation with conditions in China, which has not suffered negative annual GDP growth in more than 30 years.

That, Jones' analysis says, makes it more difficult to foresee how the economic downturn will play out in China, where the top three office markets are in Beijing, Shanghai and Hong Kong.. Other factors complicating the forecast include the sizzling annual growth rate of more than 10% in China's economy, and the strength its markets have shown in weathering the Asian financial crisis in 1997 and the SARS outbreak in 2002.

Despite these strengths, China's economy and commercial real estate markets are not exempt from the impact of slowing economic growth, according to the Torto Wheaton analysis. "In fact, while China's economy continues to expand, concerns mount among economic planners," the report says. Specifically, it notes that Hong Kong may already have entered into a mild recession.

Some of the same negative indicators that have plagued the US office markets may now be vexing China. For example, layoffs in both manufacturing and construction in some of the country's primary cities "are among the first indications that the economy may face struggles over the coming quarters, as global demand continues to erode demand for China's exported goods," Torto Wheaton says. Even with those caveats, however, the analysis sates that the outlook for China's economic expansion "is not all that bad." Both China and Hong Kong are expected to continue enjoying growht despite the uncertain global outlook.

Torto Wheaton's forecast says that, although data have yet to show it, "The current financial crisis will present a significant obstacle for China's office markets." It notes that Beijing and Shanghai have construction pipelines through the next two years that amounn to more than twice what they have averaged historically. "Although the rate at which space is absorbed will likely remain positive for these two markets, slower employment growth will likely be enough to push rent growth lower over the next two years," the report concludes.

Colliers International's latest quarterly report for the Chinese office market notes that new office property completions and leasing transactions declined in the third quarter in large part because the Olympic and the Paralympic games—held in Beijing in Augustand September, affected construction work schedules and some logistic services in and for the city's real estate sector. "Due to the construction being halted for the Olympics, completiondates of at least 15 office properties were rescheduled to the end of 2008 or the beginning of 2009," the Colliers report points out.