What a view I had yesterday flying over Buffalo looking down onNiagara Falls. Even from 15,000 feet up the destructive power ofthe cascades was dramatically evident.

I was on my way to meet with a group of leading Canadian realestate investors last night in Toronto to discuss Emerging Trends.Canadian players begin to realize that it will be harder tosidestep the fallout from U.S. recession and the world creditcrisis. They'll settle for being sideswiped and think they canlimit their downside. They have reason to hope because governmentregulations largely kept mortgage lending in check -- exotic loanstructures and little to no equity down didn't fly north of theborder. Housing prices have begun to fall and sales activitydiminishes, but foreclosures and delinquencies are not an issue sofar. While Canada's robust economy has slowed dramatically thanksto manufacturing slowdowns (in Ontario and Quebec) and energy pricedeclines (impacting hot growth Calgary and Edmonton), unemploymentisn't increasing yet. Consumers aren't overleveraged and thegovernment has its fiscal house in order. The country's big banksmanage to limit their losses and so far avoid much of the contagionfaced by Euro and American counterparts. You have to wonder aboutall the high-rise residential projects underway in Toronto, quitepossibly the condo capital of the world. Locals claim supply is inline with long-term, historic demand trends, but all the activityresembles Miami or Las Vegas circa 2006. Albeit Toronto is a muchlarger and more dynamic, first rank 24-hour city. Major officemarkets all enjoy vacancy rates hovering around 5% and developmenthas been relatively controlled.

As a result of all its relative prudence, Canada never enjoyedthe sharp commercial real estate pricing spikes experienced in the2002-2006 period by U.S. investors. It was a bit frustrating forlocals watching the gains mount up and many jumped into U.S.markets. But today conservative Canadian real estate hands feelbetter. They didn't get overleveraged and their exposure topotential value losses is reduced. They expect a bit of arough ride over the next 18 months, but feel secure they didn't putthemselves over a barrel, heading over those dramatic Falls.