Canada: One nation under two real estate markets
Garry Marr | Sep 28, 2012 9:49 PM ET
It’s all about western Canada. You take western Canada out and we would be going backwards. Canada is one nation but these days it looks like two commercial real estate markets.
There is the west where demand continues to soar, aided but a booming resource market, and then there is the east, which continues to tread water as it attempts to keep a lid on vacancies.
“It really is black and white,” said Ross Moore, national research director at CB Richard Ellis Canada, which will release its third quarter results next week showing a stark contrast between everything west of Ontario and the rest of the nation.
On the key measure of the amount of space absorbed by businesses in the third quarter — considered the ultimate barometer of demand — the west wins handily.
In the third quarter the west absorbed 621,275 square feet of space while the east was a negative 154,872. Year to date about 3.2 million square feet of demand have been absorbed out west compared to about 682,000 in the east.
The numbers are mirrored in the industrial space segment of the market. In the third quarter western Canada absorbed almost 4.5 million square feet while the east was negative 400,000. Year to date, the west has absorbed 8 million square feet of industrial space to the 2.7 million to the east.
“It’s all about western Canada. You take western Canada out and we would be going backwards,” said Mr. Moore.
He said despite the gains made out west it was probably a disappointing quarter for the overall Canadian real estate sector. “I think the message we have is we probably borrowed from the future a bit last year,” said Mr. Moore.
The top downtown office markets in the country were Waterloo, Edmonton and Montreal based on the absorption of space. Calgary was the top suburban market, and without it the entire country would have seen negative absorption in the third quarter of the year.
For the year Toronto is the only city in the country with negative overall office absorption but Mr. Moore thinks the Greater Toronto Area might make it to a flat year by the end of 2012.