October 8, 2008

CanaData Construction Industry Forecasts Conference

Growth in white-collar sector critical to commercial real estate markets, expert says

VINCE VERSACE

staff writer

Ongoing strength in Canada’s commercial real estate markets must include continued growth in the “white-collar” sector, says a senior real estate official.

“We need continued investment and resurgence in these modern white-collar factories,” said Paul Morse, senior vice- president, general manager and national practice director for Cushman & Wakefield LePage.

The building and renovation of office space in downtown city cores across Canada is keeping businesses and workers in the downtowns of cities instead of the suburbs, Morse said.

Inefficient and aging real estate is being addressed and this has helped commercial construction and growth. Firms in Toronto, for instance, are taking the opportunity to build in downtown cores more now than in recent memory, said Morse. The Telus Tower, RBC Centre, 18 York Street and the first phase of Bay Adelaide are examples of projects developing and investing in downtown Toronto.

While speaking at the recent 23rd annual CanaData Conference, Morse provided the following commercial markets insights.

• With little new development in central Vancouver, vacancies will remain low, but weak demand will put net rates in a holding pattern.

• Calgary’s demand for office space will depend heavily on oil and natural gas prices over the next few years.

• Central Canada is experiencing a pause in leasing activity as senior executives deal with uncertain economic times.

• Rentals in Vancouver will be stable or rise moderately, in Calgary they may soften with new supply pushing up demand and rentals will also soften in the Toronto downtown market as new space opens up.

• The strength of demand in central Toronto is expected to be neutral or negative in 2009.

The outlook for Canadian industrial markets sees a softening of demand in Western Canada as logistics and distribution activity will slow, said Morse.

Speculative building in this part of Canada has slowed down and demand for “large block speculative space” has diminished thanks to a significant reduction in port activity.

Demand for industrial space in central Canada has also weakened with tenants shifting demand to short term leases where possible.

Vacancies are on the rise in Toronto and Montreal and the diesel fuel increases are causing companies to reevaluate distribution decisions, said Morse.

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