Canada’s office market is well positioned going into the projected recession, thanks to its strong performance during recent years that drove vacancy rates down to historically low levels and continued to drive rents higher through 2008.

According to analysis conducted by Colliers International, which encompassed Canada’s six major cities including Montreal, Ottawa, Toronto, Calgary, Edmonton and Vancouver, these strong market indicators, coupled with a limited supply of new office space in most markets, will help the office market to weather the current economic slowdown.

“The performance of the Canadian office markets over the past few years has positioned them well for the upcoming challenges,” says Ian MacCulloch, vp, research with Colliers International in Canada. “However, the long lead time on new developments has again created cyclical challenges for certain markets, with new supply being delivered into a challenged economy.”

While most markets are expected to remain relatively solid, Calgary and Toronto will feel the fallout of the global economic slowdown as these two markets share the same short-term over-supply issues, with several million square feet of new office space completed in 2009 and 2010.

The global economic slowdown, which has driven down the price of oil and negatively impacted the Canadian energy sector is expected to have a ripple effect on the demand for office space in Calgary, resulting in flat to negative growth in the near future.

Similarly, softening demand due to weak economic conditions and the expected supply of several million square feet of new office space will pose challenges for some of the prestigious towers in Toronto’s financial district during 2009 and 2010.

While an emerging sublet market may put some downward pressure on rents, without any significant new projects planned in the downtown area until at least 2012, the Vancouver market is in a good position to mitigate challenging economic conditions.

With credit conditions tightening, low oil prices and several heavy oil-related projects cancelled, the growth experienced in the Edmonton office market is expected to slow down over the coming year.

The Ottawa market is expected to remain solid thanks to the stabilizing presence of the federal government, although a slight increase in vacancies is expected.

With a vacancy rate of 6.6% and no new supply of office space on the horizon, the Monteal office market is expected to hold its own during challenging economic conditions.

IE