Canadian Market Looks Good Versus US

But even that 10% looks good compared with the existing and predicted vacancy rates in the US office market, where major US firms like CB Richard Ellis, Grubb & Ellis and Jones Lang LaSalle all see the vacancy rate at more than 16% already, with the market expected to reach peak vacancy this year―and hopefully, hit bottom.

Some of the strength of Canada's office market is reflected in events of last year, like the $310 million refinancing of First Canadian Place in Toronto despite the generally weak market for office finance. Officials of the First Canadian Place building ownership said that the deal illustrates that funding is available for the right office properties despite the general difficulties facing the office market worldwide. The deal was refinanced by a First Canadian Place ownership of Brookfield Properties Corp. and its Canadian-based subsidiary, BPO Properties Ltd., along with ownership partners Canada Pension Plan Investment Board (CPPIB) and Alberta Investment Management Corp.

Toronto is one of the two strongest office markets in Canada, along with Calgary, according to the Avison Young report, which notes that those two markets nonetheless both climbed to more than 10% vacant "as a result of less than stellar leasing velocity, which muted overall demand levels."

The Calgary and Toronto markets suffered largely from the impact of new supply, according to the Avison Young report, which ponted out that―in contrast to those two large markets―two of the country's smallest markets, Regina and Winnipeg, posted only nominal increases in vacancy. Regin rose to 1.5% and Winnipeg to 5.4%, respectively, from 1.2% and 4.8%.

As Avison Young says in its introduction to its report and forecast, which covers industrial and investment sectors of the market as well as office, "Recessionary headwinds took their toll on real estate markets on both sides of the border in 2009, with the US continuing to shoulder the worst of the storm. Now several quarters intoit, the Canadian real estate sector has not been entirely immune, but appears to be weathering the downturn thanks to relatively sound, though shaken, market fundamentals.