Commercial real estate markets around the world experienced the full impact of the global economic recession in 2009, according to the 24th annual Global Market Report released by NAI Global. Rising vacancy rates and declining rental rates were evident in virtually every market sector and geography, with weak demand and a growing supply of sublease space further eroding market fundamentals.

After a turbulent 18-24 months since the market peaked, 2009 marked a year where transaction volume nearly came to a standstill as corporate tenants waited for clear signs of recovery and investors remained on the sidelines waiting for signs the bottom has been reached. As the year progressed, government intervention in the form of stimulus packages in the U.S., Europe and parts of Asia took hold and by year’s end many markets had begun to stabilize. However, with U.S. unemployment topping 10%, consumer demand and spending power at their lowest levels in decades and international manufacturing and trade proceeding at a crawl, the global recovery will take some time to truly stimulate economic growth.

“The past year was extremely challenging for commercial real estate, and we don’t anticipate much new demand in 2010,” said Jeffrey M. Finn, President & CEO of NAI Global. “We’re working with our corporate clients to help them take advantage of the current tenants’ market to reduce their long-term occupancy costs. Many tenants are able to negotiate more favorable lease terms today in exchange for a longer commitment. This ‘extend and blend’ practice is a trend we see continuing well into the next 18-24 months.”

Investors who have been sidelined by economic uncertainty will see tremendous acquisition opportunities in the coming year as banks and financial institutions clean up their balance sheets and move more aggressively to dispose of commercial real estate loans and financially distressed real estate assets, said Finn.

“The recession has been over for six months and job growth is just months away, but the fact remains it will be impossible to predict what will happen next,” added Dr. Peter Linneman, NAI Global Chief Economist and Principal at Linneman Associates. “With significant tax, healthcare and regulatory proposals still in the offing, there is little clarity as to the ultimate outcomes or costs. We’re concerned with commercial mortgage delinquency rates as they have been on the rise and could keep the commercial real estate industry in neutral for several more months.”

NAI Global is one of the largest real estate services providers worldwide. Headquartered in Princeton, New Jersey, NAI Global manages a network of 5,000 professionals and 325 offices in 55 countries. Now in its 24th year, NAI’s Global Market Report offers insider insight and perspective on market conditions reported by NAI experts on the ground in over 200 property markets worldwide. To obtain a copy of the full report, contact psetaro@naiglobal.com.

Local economist John Mitchell gave an economic forecast for 2010 at a Portland Business Alliance forum this morning. Mitchell said that the recession is likely either over or nearly over, and projected a fairly slow recovery. Though residential real estate has already seen gains, he expects commercial real estate to take much longer to recover. Mitchell is a principal at M & H Economic Consultants, and was previously a chief economist at US Bancorp.

The Daily Journal of Commerce and Portland Tribune both covered the event, and Oregon Business Editor Robin Doussard has a good blog post about it.

The PBA holds breakfast forums once a month. January’s forum is on the future of Portland’s newspapers.

The large number of high-tech companies in Oregon and Washington will benefit when tech spending picks up again, Moody’s predicted, and home sales in these states will be stimulated by lower prices and good mortgage rates.

You can find The Oregonian’s coverage here.

National Highlights

President Barack Obama took immediate economic policy action after his inauguration in January. A $787 billion stimulus package, passed in mid-February, includes tax cuts for most Americans, increased unemployment benefits, and funds for infrastructure projects, education and health care. In addition, a $75 billion mortgage assistance program aims to help up to 9 million Americans refinance their homes or avoid foreclosure.

The government is also taking steps to mend the nation’s financial system. Treasury Secretary Timothy F. Geithner revealed some details of a financial system reform, which would provide the government with more power to intervene in non-bank financial institutions. The major stock markets gained 500 points with the news of this plan on March 23, whereas in late February and early March the markets had fallen to lows not seen since 1997.

National unemployment numbers continued to be discouraging. Unemployment rose to 8.1% in February, the highest it’s been since 1983. Major employers across many sectors, from Nissan to Caterpillar to Home Depot to Sprint Nextel, slashed thousands of jobs.

But after months of disheartening news, a few economic indicators showed positive signs this quarter. Sales of existing homes grew 5.1% in February, according to the National Association of Realtors, and 30-year mortgage rates have fallen to 4.85%, the lowest level since 1971. Orders for durable goods also increased 3.4% in February, according to the Commerce Department, which was better than expected. And consumer spending rose 1% in January and .2% in February after months of considerable declines.

Local Highlights

State unemployment rose to 10.8% in February, with 9.6% unemployment in the Portland Metropolitan Area. Two major Portland-area employers, Oregon Health & Science University and Intel, each laid off up to 1,000 people this quarter. However, Intel announced that it will invest $1.5 billion at Intel Oregon during 2009-2010. Oregon will also benefit from stimulus measures. Go Oregon!, a state stimulus package, will provide $175 million for infrastructure projects, and federal stimulus funds include $76 million for public transportation and $334 million for road and bridge repairs.

Portland’s bid for a Major League Soccer team was the talk of the town this quarter. The Timbers gained approval to move up to the majors in 2011 with the franchise fee paid by owner Merritt Paulson. If funding can be acquired, the Timbers will play at an upgraded PGE Park, and the minor league Beavers baseball team will move to a new stadium in the Rose Quarter. City leaders and stakeholders are also working on renewing the Rose Quarter and surrounding area as a year-round destination for entertainment and dining, not just sporting events.