TORONTO-The Canadian office market continues to lead the US office market, as less uncertainty, oil money and single-digit vacancy rates abound in the Great White North, according to recent reports by Avison Young. The company is based here, but operates in major US cities such as Boston, Chicago and Washington, DC as well.
In its Mid-Year 2011 Office Market Report, the company says office vacancy in Canada has dropped to 7.8%, compared to 12.6% in the US market. Comparing CBDs, downtowns in Canada were even further occupied, with only 6.2% vacancy, while the US had its smallest vacancy rate in Washington, DC at 11.8%.
Development is also different for the two adjoining countries. While large-block opportunities are tight across North America, there’s about eight million square feet under development in Canada. There’s 5.6 million square feet under development in Washington, DC, but that’s very little compared to the total 10 billion square feet in the United States.
Mark Rose, Avison CEO, tells GlobeSt.com that jobs have played a role in the market differences. “Canada has had strong growth and employment, where US unemployment numbers have been going the wrong way,” Rose says.
He points to Calgary as a beneficiary of the current economy. With oil barrel prices hitting $100 this year, the city benefits from having petroleum company headquarters with proximity to the Canada oil sands. Calgary saw 1.2 million square feet of absorption in the first quarter 2011, with another 2.7 million square feet under construction. However, preleasing has been key there, as oil prices have been uneven. “If oil drops to $60 a barrel because the states spiral into a double-dip recession, that will have a dramatic effect on Calgary,” Rose says.
That doesn’t mean that Canada has lost faith in its southern neighbor, he says. Canadian investors continue to pump more equity into US property than any other country, though these investors are also starting to focus more on local property. Dundee Real Estate Investment Trust, based here, closed a public offering Aug. 15 for $166 million to assist in buying 29 office properties in Canada for $850 million from Blackstone Real Estate Advisors LP and Slate Properties Inc.
Rose says that notwithstanding the recent uncertainty in the US markets, Canadian office property should continue to move in the right direction through the end of the year. “However, with the debt ceiling crisis and confidence crisis in the US, it could well be a very negative story for the back half of the year. We’ll just have to watch the risk,” he says.
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