Note to Editors: The full 2010 Mid-Year Outlook is available at http://tinyurl.com/2010MidYear
TORONTO, June 17 /CNW/ - Canada's major office and industrial real estate markets stood up better than expected during the global recession and continue to recover faster than many markets in the United States and Europe, according to Cushman & Wakefield's 2010 Mid-Year Outlook released today.
The comprehensive report covering 12 major markets across Canada found that even though the global recession took a greater toll in places like Calgary and some suburban and industrial markets, growth in demand was generally much stronger than expected - an indication of long-term business confidence.
In downtown Toronto, where some 4.5 million square feet of new developments were coming on stream just as the global recession was touching down, some market watchers were led to believe that the downtown market was entering a long period of double digit vacancy. However, thanks to the strength of Canada's world-renowned financial services sector, banks and related service companies exceeded growth expectations.
"This underscores Toronto's enviable position as Canada's financial capital. Given underlying demand strength, we are likely to see premium vacancy nudge into double digits, but the market will remain more evenly balanced than first considered," said Paul Morse, Senior Managing Director Toronto Office Leasing of Cushman & Wakefield.
"It is fair to say all our major markets have had a share of challenges through this economic cycle. However, in most cases, markets across Canada have done better than expected," said Pierre Bergevin, President & CEO of Cushman & Wakefield. "This speaks to the ability of our landlords and tenants to make wise, restrained decisions through difficult periods, and also to the inherent and unique strength of the Canadian economy."
Downtown Vancouver also surprised market pundits by withstanding the recession from a demand perspective far better than expected and is already experiencing upward pressure on rental rates. However suburban markets, particularly Richmond, continue to be dragged down by the slow US recovery.
Calgary, with a downtown area that will have expanded by some 7.5 million square feet of space by 2012, is feeling the strain of low gas prices, which have put heavy breaks on office-using demand. Moderate strength in oil prices has helped mitigate the impact that shale gas technology has had on demand within the office markets. Although vacancy rates in Downtown Calgary will continue to rise, optimism remains strong, as world economies recover and resource demand picks up. The outlook remains positive, particularly as there were surprisingly few layoffs during the recession.
Montreal experienced two quarters of weak demand when the recession initially hit and has been slowly reviving. Vacancy rates for premium space in the central area remain tight at 8.3%. As 2010 progresses demand is expected to shift into modest positive territory, and tenants will be faced with increasingly fewer options for larger blocks of contiguous space. Rental rate stability will characterize the market for some quarters, followed by modest upward pressure as we progress into 2011.
Other market highlights include:
GTA industrial tenants who shelved expansion plans to get through the recession are now moving quickly to optimize their positions. A significant flight to quality is taking place with large tenants gobbling up the remaining blocks of quality new speculative space, to the point that there are only a couple of larger buildings left.
While Edmonton's office market remains tight, the completion of the EPCOR Tower in late 2011 will bring an additional 614,000 square feet to the CBD. This additional space, in combination with weak government demand, will result in continued softening of rental rates in the central area.
Winnipeg, the gateway to the west, is poised for good times thanks to the development of a new airport and inland port, which has attracted interest from companies around the world. Downtown leasing activity has also been strong as businesses move to higher-quality buildings. And in a tight suburban office market, construction is expected to be underway by year-end.
Ottawa will see a softening of market conditions, as 725,000 square feet of larger blocks of space return to market over the next year. CBD vacancy is expected to rise to 6%, though the rise in vacancy could be offset by the near term needs of the federal government.
Halifax's downtown office market is set for significant development for the first time in three decades.
St. John's is currently experiencing a landlords' market, putting pressure on tenants to enter into early lease renewals.
Cushman & Wakefield is the world's largest privately-held commercial real estate services firm. Founded in 1917, it has 231 offices in 58 countries and more than 13,000 employees. The firm represents a diverse customer base ranging from small businesses to Fortune 500 companies. A recognized leader in global real estate research, the firm publishes a broad array of proprietary reports available on its online Knowledge Center at www.cushmanwakefield.com.
SOURCE CUSHMAN & WAKEFIELD
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