Global Markets Fall in Tandem with US

LONDON-If it's any help, and likely it's not, we're not alone. After a year where global markets seemed to be shedding their reliance and gaining growth over the US economy, the country showed again its dominance by dragging the rest of the world down this past week. The more than 20% drop in the US stock market, including the Dow Jones' dip below 8,000 points today, has disrupted every foreign market, with some countries such as Austria and Russia shutting down trading, and shares down at their lowest levels in others.

Though many governments are cutting interest rates and promising to use funds to prop up finance companies, global fear of a recession has poisoned the confidence in the growth of the past few years, especially in Europe and Asia. As US President Bush tried to reassure Americans to be confident in his speech this morning, finance leaders from the Group of Seven, which includes the US, Canada, Germany, Britain, Japan, France and Italy, are in Washington, DC discussing the crisis. The Dow Jones rose to almost 9,000 points this afternoon as analysts gained hope that the leaders will take some kind of joint effort by Monday.

Market researchers, traditionally known for being positive during tough economic times, are now collectively expressing uncertainty about the future, though most are convinced that there will be no recovery until at least the end of 2009 – and it may get worse before it gets better. At the locally based Royal Institution of Chartered Surveyors, chief economist Simon Rubinsohn says growth had been remarkably strong in the EU until a few weeks ago, with rental growth high. However, with the crisis unfolding, commercial real estate developers have quickly shrunk plans for projects across the globe. It's likely that tenants, and then owners, will soon feel the pinch, he says. "We're at the early stages of adjustment," he tells GlobeSt.com Friday. "With Europe teetering on the edge of recession, it's hard to believe there's not going to be some impact on rents. There will be tenants who go out of business, and the yield on properties will go down as capital values continue to soften."

He says it's hard for governments to stay ahead of the current crisis, especially with the possibility of public whiplash for doing things wrong or immorally. However, he says the world leaders need to act faster, especially with solutions such as higher rate cuts. "I think a slash-and-burn approach is going to be necessary to avert a deep recession, something that at this moment may be inevitable," Rubinsohn says.

Jason Mattox, chief administrative officer at Dallas-based Behringer Harvard, says its' no surprise that the world economy has been so affected by the US troubles. "Major investment banks, general banks, equity houses, all of these institutions are interconnected. It's very difficult for major markets to be completely left out, especially when something like the credit crunch hit the market so heavily," Mattox says. The company opened a new office in Germany in September.

He says that as a foreign investor, his company isn't looking for the bottom. "We're looking for good strong fundamentals," he tells GlobeSt.com. "We're taking a wait-and-see attitude. Investors such as ourselves that are equipped with cash and have the ability to strike will be very well prepared on the upswing." For example, he points out that though a recent report says Washington, DC, a bastion of office growth, is going to see some drops, a good market will always perform well over the long term. "Despite the fact that there's some new supply added, we don't run into too many researchers who belive that government or major office users are going to stop using space in DC. It's that way across the globe as well."