As autumn rolls around we face another set of do or die events for the world economy. Four years after the start of the financial crisis political and electoral events are now seen as key to kick starting the global economy as the policy toolkit looks increasingly threadbare. While property may not be at the forefront of the discussions it will be impacted directly and indirectly from the events which unfold between now and the end of the year.
The number of key dates over the next four months are too numerous to mention but the key for commercial property is that the final quarter of the year is traditionally the busiest for investors. The danger of so many milestones is that there is always another one on the horizon to stall decision making. The final quarter of 2011 was the busiest since the financial crisis with almost US$120 billion transacted globally, with all three regions recording significant increases over their third quarter numbers.
The challenges for the global economy should not be underestimated, however the rewards are great. If the Eurozone moves down the path of greater political and economic reform and effectively becomes one country it will be the largest economy in the world. A smooth handover in China is fundamental to ensuring the economic gains made over the last 20 years are not frittered away by a small minority holding power. The United States is more complex; whoever wins power in November faces challenges that cannot be overcome in the short term, despite the political rhetoric. At least we are guaranteed a winner, a Greek scenario of election after election would see gridlock become the new normal. In the short term all eyes are on the German Constitutional Court, September 12th, and their ratification of the European Stability Mechanism (ESM), the same day as the Dutch go to the polls. These two events will set the tone for the period up to the end of the year and signal the path ahead for the Eurozone. A positive verdict from the court, and assistance for Spain and Italy would flow relatively quickly through the ESM and the European Central Bank. The Dutch elections are finely balanced with fringe parties attracting much of the attention and growth policies winning out over austerity, but whatever the result it is unlikely the Dutch would derail further European integration.
While it has taken four years, countless summits (Brussels hotels set to do well this quarter), trillions of dollars of stimulus and intervention the next four months could see the foundations established to resolve the current malaise. The multi-year deleveraging that is underway will continue as the scale of the problem for households and governments is too great to dismiss, however a series of positive events could well see the final quarter of 2012 continue the tradition of a frantic end to the year for commercial property investment markets.
