GLOBAL - The forecast for Europe is cautious, for the US better, and for some of Asia the best of all, according to Jones Lang LaSalle's (JLL) quarterly Global Market Perspective.

With the ever-present risk of contagion from the sovereign debt crises in Greece and Spain "within and beyond the eurozone", the report forecast "modest" European growth in the short term.

Concerns over the eurozone sovereign debt crisis and contagion will continue to weigh on the markets globally and feed through to investor sentiment, it said.  "The risk of default has, for the time being, abated… However the focus is now shifting to the ability of the highly indebted countries to implement austerity measures and to the effects of the European rescue plan, which could vastly increase borrowing and dampen Europe's nascent recovery."

Against relative pessimism over Europe and concerns over a Chinese economic slowdown, the report identified "more firmly established" US growth in the first quarter.

Overall, the patchy recovery in commercial property markets during the first three months of 2010 reflected diverse economic fundamentals. While office markets began to stabilise in the US and Europe, leasing volumes remained below trend. However, the report identified prime hotspots in London, Moscow and some Asian markets, with expanded office markets and prime rental growth in Shanghai and Hong Kong.

In office, Europe may see modest recovery in 2010, said the report. In the US, rental growth will be restricted to "a narrow band of prime office space, and a common theme to all these markets is the ‘two speed' (and even ‘two direction') dynamic between prime and secondary product and locations".

With constrained office supply in mature markets, the report predicted a shortage of grade-A supply over the next two years and possible mispricing where negative sentiment over weak demand fails to take into account supply scarcity. Better rental expectations now make speculative development more economically viable, it concluded.