Canada's Office Market Strength Expected to Mitigate the Impact of the Recession According to Colliers International

    -- Strong finish in 2008 will underpin markets performance during the
    next 12 - 18 months of tough economic conditions; Toronto and Calgary to
    face greater challenges --

    TORONTO, Dec. 23 /CNW/ - Canada's office market is well positioned going
into the projected recession, thanks to its strong performance during recent
years that drove vacancy rates down to historically low levels and continued
to drive rents higher through 2008. According to analysis conducted by
Colliers International, which encompassed Canada's six major cities including
Montreal, Ottawa, Toronto, Calgary, Edmonton and Vancouver, these strong
market indicators, coupled with a limited supply of new office space in most
markets, will help the office market to weather the current economic slowdown.
    "The performance of the Canadian office markets over the past few years
has positioned them well for the upcoming challenges," says Ian MacCulloch,
Vice President, Research with Colliers International in Canada. "However, the
long lead time on new developments has again created cyclical challenges for
certain markets, with new supply being delivered into a challenged economy.
The depth of the forecasted recession will be measured in sublet space, which
is an excellent barometer of corporate health and profitability, and by
extension the performance of commercial real estate markets."
    While most markets are expected to remain relatively solid, Calgary and
Toronto will feel the fallout of the global economic slowdown as these two
markets share the same short-term over-supply issues, with several million
square feet of new office space completed in 2009 and 2010. Unlike the common
trend in other business centres over the past year, vacancy rates in Calgary
were on the rise going from 3.20% in the last quarter of 2007 to 3.50% in the
third quarter of 2008, although rental rates increased from $40 to $48 per sq.
ft. during this time frame. The global economic slowdown, which has driven
down the price of oil and negatively impacted the Canadian energy sector is
expected to have a ripple effect on the demand for office space in Calgary,
resulting in flat to negative growth in the near future.
    Similarly, yet for reasons related to the financial sector, the Toronto
office market is expected to share the same future. While vacancy rates were
on the decline over the past year (5.60% in Q4'07 down to 4.50%) and rents
continued to escalate ($21.36 to $22.90 per sq. ft. for the same period),
softening demand due to weak economic conditions and the expected supply of
several million square feet of new office space will pose challenges for some
of the prestigious towers in Toronto's financial district during 2009 and
    "In addition to the new delivery of office space in certain markets,
another factor that will drive vacancy rates upwards is the emergence of
underutilized space held by companies," adds Ian MacCulloch. "While the
economy flourished, tenants tended to snap-up additional space that became
available in their buildings to accommodate future growth. However, as the
economic conditions continue to deteriorate, companies will look for ways to
adjust operating expenses, releasing this underutilized office space back to
the market in the form of sublets. This will result in increased vacancy
rates, at least in the short-term."

    Other cities surveyed by Colliers International include:

    Vancouver, which saw vacancy levels drop from 4.7% in Q4'07 to 4.0% in
Q3'08 and marginal rental rates increase from $24 to $24.50 per sq. ft. for
the same period. While an emerging sublet market may put some downward
pressure on rents, without any significant new projects planned in the
downtown area until at least 2012, the market is in a good position to
mitigate challenging economic conditions. Another positive factor are the 2010
Olympic Games, which have created demand for office space that will remain in
place through the event, with the hope being that market conditions are on the
upswing when that space is vacated.

    Edmonton - With credit conditions tightening, low oil prices and several
heavy oil-related projects cancelled, the growth experienced in the Edmonton
office market is expected to slow down over the coming year. Rents are
expected to plateau at the current $32 per sq. ft. levels and a low vacancy
rate of 3.80% (as of September 2008) should provide some stability in the
months to come.

    Ottawa - Like Calgary, the Ottawa office market saw a rise in vacancy
rate over the past 12 months from 5.60% to 6.30% and stable rents of $17.23
per sq. ft. Yet the market is expected to remain solid thanks to the
stabilizing presence of the Federal Government, although a slight increase in
vacancies is expected to occur due primarily to new supply and some
space-juggling before it is absorbed relatively quickly both by the private
and public sectors.

    Montreal - With a vacancy rate of 6.60% (down from 9.10% at the end of
2007) and no new supply of office space on the horizon, the office market,
primarily in the core business district, is expected to hold its own during
challenging economic conditions. The expected delays in new office projects
due to the tight lending conditions developers are facing, coupled with low
vacancy rates may even push tenants to the suburbs to solve any short-term
demand issues.

    For additional information please visit:

    About Colliers International

    Colliers Macaulay Nicolls Inc. (CMN) operating as Colliers International
is a leading global real estate services company that provides a full range of
services to real estate users, owners and investors worldwide. Colliers
operates in 293 offices in 61 countries. Services include brokerage, property
management, hotel investment sales and consulting, corporate services,
valuation, consulting and appraisal services, mortgage banking and research.
Colliers International is a worldwide affiliation of independently owned and
operated companies.

For further information:

For further information: Gal Wilder, Katie Gates, Cohn & Wolfe, Tel:
(416) 924-5700, Email:,

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