Canadian Market Fares Well Despite US Slump

Despite that connection, however, the Torto Wheaton study shows that Canada managed to gain 203,000 jobs from January through October of this year while the US lost more than a million jobs and unemployment was growing. Office market vacancies "remain near historic lows" in Canada, although the overall vacancy has increased by about four-tenths of a percentage point compared with a 1% increase in US vacancies.

The Torto Wheaton analysis adds, however, that "There are some impediments to a repeat performance for 2009" for the Canadian office market despite its impressive performance through the first three quarters of 2008. Specifically, it mentions the deterioration in global financial markets, "which will eventually have enough of an impact to cause Canadian financial institutions to curtail hiring and cut staff," the report says. As GlobeSt.com reported recently, the worldwide credit markets shutdown has already made itself felt in Canada lately as H&R REIT faces financing challenges for its two-million-square-foot Bow office complex in Calgary and its 325,000-square-foot Bell project in Mississauga, Ontario.

Falling crude oil prices also represent a potential setback for Canada because the oil sands projects of Western Canada, intended to extract crude from tar sands, are less profitable when crude prices fall. If the oil sands projects become less profitable, that turn of events could create problems for Alberta's economy and office markets as oil companies become more conservative in their investments in the region.

The Torto Wheaton study states that, after "a great recovery in demand since 2004," office space absorption in Canada is now expected to slow as oil prices stabilize and the global recession begins to affect Canadian firms. In the US, office demand is expected to contract in most markets. Even with the impediments to a repeat of the Canadian office market's 2008 performance, the Torto Wheaton report concludes, "Economic and property market fundamentals do suggest better performance up north" than in the US in 2009.