A survey of 11 of Canada’s top commercial real estate markets indicates that landlords and tenants are taking a wait-and-see approach to commercial real estate transactions.

The survey by Cushman & Wakefield LePage covers the office, industrial, retail and investment sectors in 11 markets across Cnada.

“There remains little doubt that Canada is headed towards a recession stretching into at least the first quarter of 2009,” said Pierre Bergevin, president and CEO. “However, we don’t expect to see any radical market corrections in Canadian commercial real estate — thanks to solid lending practices and conservative development strategies over the past decade.”

“Canada’s five largest markets were the tightest when compared to the 10 largest markets in the United States and, while we do expect to see vacancy rates increase because of lower demand and some new space coming onto the market, we don’t expect that these conditions will seriously unbalance the market,” said Bergevin.

The industrial sector can expect a large amount of additional new supply in the next year, and that will put downward pressure on rental rates and will increase vacancy.

However, the lower Canadian dollar and lower prices for oil may help the manufacturing, distribution and warehousing sector – providing some stability to the industrial market in Central Canada.

“The market will make adjustments as new space is absorbed more slowly and rental rates will certainly come down, but as the overall economic conditions improve, so will the industrial real estate sector,” Bergevin said.

With the economy turning, Canadian retailers will have to be more strategic and settle in for lower sales and curtailed growth.

“We fully expect that discount and big box retailers may find increased traffic as shoppers look for bargains. There may be opportunities for these companies to consider conservative expansions into suburban markets even as the economy shows weakness,” said Bergevin. “Similarly, but on the other end of the spectrum, we will see premium brands and luxury retailers continue to scout locations with premier addresses — like Bloor Street in Toronto and Robson Street in Vancouver.”

With the global credit crunch, access to capital will continue to be the stumbling block for most investors in 2009, but this will also create a more buyer friendly environment.

“In many ways 2009 will shape up to be a “cash buyers market” — where well-capitalized private buyers, along with selective pension funds, public entities and possibly some new opportunity funds, will pick through the available product and take advantage of the limited competition on the buy side,” said Bergevin.

IE