Toronto’s Downtown Financial Core Sees Dramatic Increase in Office Market Inventory in 2010, Says 24th Annual Global Market Report
Tenants, Investors to Take the Reins in 2010
TORONTO, ON, January 28, 2010 – Toronto will see approximately 3 million square feet of new office supply completed this year which is expected to increase vacancy in the downtown core. Invariably this will put pressure on the older towers, such as the bank towers, to fill new space.
“We can expect transactions to increase in 2010 as bid-ask spreads between vendors and purchasers are starting to level off and Canadian lenders are pushing to lend once again,” said Craig Smith, President of Ashlar Urban.
“In the beginning of 2009 nobody thought that the REITS would be able to raise money. However by September of 2009 Canadian REITS had raised $1.3 Billion and are now in a buying mode. Furthermore we are seeing that private capital is starting to get deployed as much capital sat on the sidelines this past year.”
Canada as a whole has emerged remarkably well from the global economic crisis. Our overall economy coupled with the stability demonstrated by our local real estate markets have made Canada an attractive place for both local and foreign investors to invest in commercial real estate as a long term asset.
Around the world commercial real estate markets experienced the full impact of the global economic recession in 2009, according to the 24th annual Global Market Report released today by NAI Global. Rising vacancy rates and declining rental rates were evident in virtually every market sector and geography, with weak demand and a growing supply of sublease space further eroding market fundamentals.
After a turbulent 18-24 months since the market peaked, 2009 marked a year where transaction volume nearly came to a standstill as corporate tenants waited for clear signs of recovery and investors remained on the sidelines waiting for signs the bottom has been reached. As the year progressed, government intervention in the form of stimulus packages in the U.S., Europe and parts of Asia took hold and by year’s end many markets had begun to stabilize. However, with U.S. unemployment topping 10%, consumer demand and spending power at their lowest levels in decades and international manufacturing and trade proceeding at a crawl, the global recovery will take some time to truly stimulate economic growth.
“The past year was extremely challenging for commercial real estate, and we don’t anticipate much new demand in 2010,” said Jeffrey M. Finn, President & CEO of NAI Global. “We’re working with our corporate clients to help them take advantage of the current tenants’ market to reduce their long-term occupancy costs. Many tenants are able to negotiate more favorable lease terms today in exchange for a longer commitment. This ‘extend and blend’ practice is a trend we see continuing well into the next 18-24 months.”
Investors who have been sidelined by economic uncertainty will see tremendous acquisition opportunities in the coming year as banks and financial institutions clean up their balance sheets and move more aggressively to dispose of commercial real estate loans and financially distressed real estate assets, said Finn.
“The recession has been over for six months and job growth is just months away, but the fact remains it will be impossible to predict what will happen next,” added Dr. Peter Linneman, NAI Global Chief Economist and Principal at Linneman Associates. “With significant tax, healthcare and regulatory proposals still in the offing, there is little clarity as to the ultimate outcomes or costs. We’re concerned with commercial mortgage delinquency rates as they have been on the rise and could keep the commercial real estate industry in neutral for several more months.”
While the United States, parts of Europe, the Middle East, Asia and Latin America experienced a deep recession, some economies survived 2009 nearly intact. Brazil, India and China all experienced a slowdown in economic growth, international trade and manufacturing demand, yet continued to post positive GDP growth for the year, far outpacing their neighbors and global trends. Brazil is looking for increased activity in the commercial real estate sector, specifically in big cities like Rio de Janeiro, which will soon host the World Cup and Olympic Games. At the end of 2009, China began to see a sharp rise in foreign direct investment in its manufacturing sector, and is expected to post 9% GDP growth in the coming year. India is positioning itself as a leader in logistics and manufacturing, and though commercial property markets will remain soft in the short term, significant growth is expected over the longer term.
The 2010 Global Market Report includes market data for more than 200 markets worldwide. For more information, contact Stacey Funk, Marketing Director at sfunk@ashlarurban.com.
About Ashlar Urban
Ashlar Urban is a full service real estate firm located in Toronto, Ontario and the Toronto area representative for NAI Global, the world’s largest managed network of real estate service-providers comprising 5,000 brokers in 325 offices serving in 55 countries throughout the world. Ashlar Urban’s professionals represent clients in all aspects of commercial real estate including multi-site acquisitions and dispositions, sublease, tenant/landlord representation, lease administration and audit, investment services, due diligence and related consulting and advisory services. To learn more, visit www.ashlarurban.com or call 416 205 9222. Follow us on Twitter (@AshlarUrban)
About NAI Global
NAI Global is one of the leading commercial real estate services providers worldwide. Headquartered in Princeton, New Jersey, NAI Global manages a network of 5,000 commercial real estate professionals and 325 offices in over 55 countries, and completes over $45 billion in annual transaction volume. Since 1978, NAI Global clients have built their businesses on the power of NAI’s expanding network. NAI Global’s extensive services include corporate real estate services, brokerage and leasing, property and facilities management, real estate investment and capital market services, due diligence, global supply chain consulting and related advisory services. To learn more, visit www.naiglobal.com. Follow us on Twitter (@NAIGlobal) and Facebook.
