TORONTO-According to a recent mid-year office report from Avison Young, there continues to be a significant dichotomy between the performance of the Canadian and US office markets. While Canada has displayed stability, progress across the US has been more uneven, the report says, stalling any significant growth.
According to Mark Rose, chair and CEO of the firm, “As we close the books and look back at the first-half performance of 2012, we were hoping to be further along the recovery curve, at least in the US. In light of moderate job and GDP growth, the majority of Canada’s markets continue to display healthy office market fundamentals, while the US has progressed at a slower pace.”
He continues that “This is not to say that advances have not been made; however, performance to date can be best characterized as uneven, with a handful of office markets seeing the greatest improvement.”
The annual report covers the office markets in 25 regions: Calgary, Edmonton, Halifax, Lethbridge, Mississauga, Montreal, Ottawa, Quebec City, Regina, Toronto, Vancouver, Winnipeg, Atlanta, Boston, Charleston, Chicago, Dallas, Houston, Las Vegas, Los Angeles, New York, Pittsburgh, Reno, San Francisco, and Washington, DC.
“It’s also very difficult to ignore the perpetual stream of negative economic news from abroad and the adverse effect on the commercial real estate markets in North America,” he adds. “Unfortunately, the threat of an economic slowdown is still being talked about in the US as the Fed debates another round of quantitative easing as we approach the upcoming presidential election, leaving the outlook for the second half of 2012 anywhere from neutral to negative.”
In the 25 markets that Avison Young surveyed, market-wide office vacancy declined 80 basis points over the past 12 months to end the first half of 2012 at 12.7%. This is an improvement over the previous survey—which covered mid-year 2010 to mid-year 2011—in which office vacancy increased by 80 bps. Collectively, the downtown vacancy rate declined by a similar figure to settle at 10.5% at mid-year 2012, while the suburban rate closed at 14.8%, down 60 bps from one year ago, says the report.
“Although business and consumer confidence has waned of late, it’s not all doom and gloom, as many corporations on both sides of the border sport positive balance sheets and are flush with cash, ready to expand their operations,” explains Rose. “Despite the traditional lull in activity associated with the summer months, our brokers are reporting a healthy pipeline of deal flow, indicating the willingness of corporations to execute on their real estate strategies.”
Statistically, the performance of the Canadian and US office markets is “clearly evident in the wide gap that remains between the countries’ vacancy rates.” While Canada’s overall office vacancy rate stands at 7.1%, that of the U.S. is almost double, at 13.9%,” says Bill Argeropoulos, VP and director of research in Canada for the firm.
“It is worth noting that since the protracted recession began nearly four years ago, the markets have managed to move towards a new equilibrium, where uncertainty is the new certainty,” he adds. “Adapting to a new reality where Eurozone worries, civil unrest in the Middle East and general economic malaise in the US are taken for granted, most cities are seeing at least some new office construction – demonstrating growing optimism.”
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
