TORONTO-The Canadian and US commercial real estate markets are shaping up to be a slightly improved version of last year, and could pick up substantially in the second half if decision maker confidence returns in earnest, according to a 2011 forecast report by locally-based Avison Young.

Mark Rose, chairman and CEO, says positive fundamentals such as transaction volume, low interest rates and available capital should continue this year, but job availability and global economic problems could still keep down the two nation’s markets for another year.

Canada continues to lead the US as both countries follow patterns of recovery. Canadian office vacancy in 2010 was below 10%, compared to 13% in the US, retail recovered better in Canada, and industrial vacancy in Canada was half of the US 10% figure on average last year. However, global investors favored the US. Even major Canadian investors such as the Canada Pension Plan Investment Board, Brookfield Properties, Manulife Financial and REITs such as RioCan and Artis ventured into the US with billions of dollars in 2010.

This year, confidence is the key factor to a comeback, Rose says, and it’s not yet realized in either nation.

“If you tell me that we’re in a period of historically low interest rates, widely and wildly available capital, tremendous interest from sellers to sell and buyers to buy, one would naturally assume that we must be in the height of a market,” Rose tells GlobeSt.com. “The missing piece is the emotion, the fear and confusion, or lack of confidence in the signs that things should get better.”

When this confidence is missing, Rose says, the deal gestation period elongates and conflicts, and one or two factors can impact decision makers, as in a lack of jobs or economic problems in other countries such as Portugal or Spain. “We’re clearly not yet at that place where decision makers can get past these problems,” he says.

There will be incremental improvements in confidence, Rose says. For example, the bid-ask spread is narrowing, where an owner wouldn’t budge last year from a $5 million price will be more apt this year to negotiate with a buyer with a $3 million bid, and so on to the larger properties, he says.

Barring any setbacks such as economy failures in nations such as Portugal or Spain, Rose says there’s enough pent-up activity that needs or wants to happen to break through the freeze on strategic thinking. “We should recover with confidence in the second half of the year,” he says.