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TORONTO-Canada cities came in at No. 1 and No. 5 in LaSalle Investment Management’s 2005 North American Regional Economic Growth Index, a model used to identify future demand and risks for commercial real estate, particularly office and industrial buildings. Toronto took the top spot and Calgary rounded out the top five, which includes Phoenix, Orlando and Raleigh, NC.

The global real estate investment manager’s economic growth index is based on factors such as employment and population growth, as well as momentum and risk factors including volatility, diversity and business costs. All told, 36 North American cities were evaluated and four Canada cities are in the top 15, with Vancouver, coming in at No. 13 and Montreal No. 15.

Underpinning Toronto’s strength is its diverse economy, according to the report. “Although the city’s manufacturing sector and the closely tied transportation sector have undergone some recent weakness as the Canadian dollar and oil prices have increased, both sectors are anticipated to improve in the coming years,” states LaSalle. Strong employment and population growth through 2009, as well as a positive economic outlook, were other major factors behind Toronto’s top ranking, according to the report.

The office center for Alberta’s energy industry, Calgary, has been boosted by strong oil and gas demand, which have contributed to the city’s low-tax environment, according to the report. That, in turn, has attracted more energy companies. Imperial Oil recently relocated its headquarters there after 124 years in Toronto, according to the report.

“Smaller cities with strong growth drivers, like energy, or with attractive lifestyles, are being propelled upwards in the ranking.” says Catherine Marshall, LaSalle’s senior vice president of research and strategy. “While Toronto continues to benefit from its size and diversity, Calgary’s expectations for growth are amplified as its economy is currently focused on high growth industries.”

Phoenix’s No. 2 ranking is primarily due to its booming residential real estate market and the economic boost housing conveys to the rest of the economy, according to LaSalle. “People are being drawn to Phoenix from all over the US,” states the report. “Within the last year, Phoenix surpassed Atlanta to lead the United States in home building activity.”

Cities ranked Nos. 5 to 10 in the Index are Las Vegas; Dallas; Atlanta; Tampa, FL; and Charlotte, NC. The Northwest cities of Portland, OR and Seattle came in at Nos. 11 and 14, respectively. Houston was No. 12. Chicago was No. 16; Washington, DC, No. 21; Los Angeles and Boston, Nos. 28 and 29; New York and San Francisco, Nos. 34 and 35.

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