What a view I had yesterday flying over Buffalo looking down on Niagara Falls. Even from 15,000 feet up the destructive power of the cascades was dramatically evident.

I was on my way to meet with a group of leading Canadian real estate investors last night in Toronto to discuss Emerging Trends. Canadian players begin to realize that it will be harder to sidestep the fallout from U.S. recession and the world credit crisis. They'll settle for being sideswiped and think they can limit their downside. They have reason to hope because government regulations largely kept mortgage lending in check -- exotic loan structures and little to no equity down didn't fly north of the border. Housing prices have begun to fall and sales activity diminishes, but foreclosures and delinquencies are not an issue so far. While Canada's robust economy has slowed dramatically thanks to manufacturing slowdowns (in Ontario and Quebec) and energy price declines (impacting hot growth Calgary and Edmonton), unemployment isn't increasing yet. Consumers aren't overleveraged and the government has its fiscal house in order. The country's big banks manage to limit their losses and so far avoid much of the contagion faced by Euro and American counterparts. You have to wonder about all the high-rise residential projects underway in Toronto, quite possibly the condo capital of the world. Locals claim supply is in line with long-term, historic demand trends, but all the activity resembles Miami or Las Vegas circa 2006. Albeit Toronto is a much larger and more dynamic, first rank 24-hour city. Major office markets all enjoy vacancy rates hovering around 5% and development has been relatively controlled.

As a result of all its relative prudence, Canada never enjoyed the sharp commercial real estate pricing spikes experienced in the 2002-2006 period by U.S. investors. It was a bit frustrating for locals watching the gains mount up and many jumped into U.S. markets. But today conservative Canadian real estate hands feel better. They didn't get overleveraged and their exposure to potential value losses is reduced. They expect a bit of a rough ride over the next 18 months, but feel secure they didn't put themselves over a barrel, heading over those dramatic Falls.