Can you expect a mid 2009 revival?
I certainly enjoy hearing more optimism around town, but my hunch is that this is a little premature. Spring fever typically spurs some activity, but I’m not convinced its the start of the next upswing we’ve all been watching for.
I’m hearing some excitement from residential realtors enjoying a seller’s market last week.
I’m hearing some excitement from commercial realtors in this article in the Edmonton Journal by Bill Mah. A few highlights:
- The deals will slow down, vacancy rates will rise and sublease space spike, but Canada’s commercial real estate will stabilize by mid-year and recover in 2010.
- Canadian markets such as Edmonton benefit from strong fundamentals and a relatively constrained supply.
- In Edmonton’s industrial real estate market, new construction and lower absorption levels bumped up the vacancy rate to a “still sparse” 1.5 per cent in December — the lowest industrial vacancy among Canadian major markets.
- The fundamentals of the Edmonton industrial real estate market remained strong throughout 2008 and Edmonton continues to be the service hub for the megaprojects of northern Alberta. After years of rising land values, prices began to plateau last year and will correct in 2009 . . . Except for new developments, industrial rental rates will hold steady . . . A wait-and-see attitude will extend into the first half of this year . . . Those developers who are still building on a speculative basis will be rewarded, as the forecast for Edmonton remains positive.
I concur that softening will continue to occur through till at least mid-2009, and stabilization through the end of 2009 is possible. I believe the situation will continue to deteriorate for our neighbors to the south as they reap the fruits of a hyper-active printing press, and the sooner our businesses can decouple from that situation the sooner we’ll see recovery. A decoupling from the US economy and increasing oil prices are going to be the key determinants in our next run.
Unfortunately if you are trying to time the market, these two factors are difficult to predict in the current chaos and you’re not going to have your “Aha!” moment until after its begun. With Alberta’s incredibly strong fundamentals, a long-term buy and hold strategy (5+ years) is still your most profitable and risk-averse option, with some good deals and motivated vendors almost a sure thing over the next 3-6 months. Be greedy when others are fearful . . . be investors, not gamblers.
I have seen the Toronto market continue to decline and expect it to do so until the end of the summer. There are 4 new AAA class office towers coming online downtown Toronto but there is no new A or B product. In the last 3 years we have seen the delta between AAA and B quality buildings increase as to as much as $20 psf where, traditionally, the spread has been $10 psf. I believe this will be the biggest correction through 2009 and we will see the AAA caliber buildings take the biggest hit.
Thanks for the insight. Very similar trend in Edmonton’s industrial market. The biggest hit is to the new developments that came online 3rd & 4th quarter ‘08. Big fancy shmancy buildings, divisible into 15,000 SF increments are sitting empty in the NW, bringing up the NW vacancy rate to over 5% (city-wide is sitting under 3%). Smaller pockets are doing just fine, with a tight market in the 1800-3000 SF spaces.