tT APPEARS that the Ca- nadian economy will be fa- vorable to commercial real estate markets in 1987. However, regional disparities, largely generated by business uncertainty in Canada’s resource-based centers, will continue to foster the ‘‘east/west dif- ferential’’, According to the Royal LePage 1987 Market Survey, a comprehensive analysis and forecast of Canada’s residential and commercial real estate markets, Eastern Canada, particularly Ontario and Quebec, largely will ex- perience healthy real estate activity in 1937. SLOWER RECOVERY On the other hand, Western Canadian markets with economies dependent on agriculture, oil and gas, or other: resource industries suffering from low com- -modity prices, largely will be faced with protracted economic. recovery, forecasts the survey, - . Certainly, the year ahead is likely to be an unsettled period for those office leas- ing markets which are in- timately dependent on the energy sector. Despite some positive steps by the interna- tional community to stabilize world oil prices and feder- al/provincial government assistance to the oil and gas industry, it is likely that of- fice leasing activity in such centers as Calgary, Edmon- ton and Halifax/Dartmouth will be negatively impacted as the resource-based business community con- tinues to consolidate and downsize. For example, in Calgary, where office leasing is in- timately tied to the fortunes of the oil and gas sector, the overall office vacancy rate is expected to be approximate- ly 19 per cent in 1987, only marginally lower than it was in 1986. UNEASINESS REMAINS Some larger tenants are attempting to negotiate leases with rental structures tied tc the price of oil; this emerging trend clearly il- lustrates the uncertainty that continues to plague much of the city’s business communi- ty. In Vancouver, protec- tionist measures initiated by the United States against the vital forest products industry will contribute to developer/investor uneasiness in 1987. Howev- er, the continuation of rela- tively favorable interest rates largely should offset this uncertainty, with the result that absorption should return to historical levels. This factor, together with the limited addition of new product in 1987, should cause the overall office vacancy rate to decline to 16 per cent by year-end 1987, compared with 19 per cent in 1986. While a substantial amount of core class A of- fice inventory is expected to come on-stream in a number of centers, particularly in the eastern markets of Toronto, Montrea] and Ottawa, development has slowed compared with that which’ occurred in the previous two years. For example, the development surge of 1985 - 1986, which saw over 1.7 million sq. ft. of class A of- fice space added to downtown Ottawa, now is winding down. Only three projects, totaling approx- imately 400,000 sq. ft., are scheduled for completion in 1987. In Toronto, Montreal and Ottawa, significant pre-leas- ing of class A space has been noted. The highest level of pre-leasing in Torento is in Metro North, where cove te- nants have made commit- ments for more than 70 per cent of the approximately 1 million sq. ft. of 1987 com- pletions. OFFICE UPGRADING A significant proportion of the demand for class A product has been generated from tenants moving later- ally to upgrade office ac- commodation. While the trend toward lateral move- ment and, in some cases downsizing, may generate much leasing activity, it will not necessarily translate into additional absorption (ab- sorption being defined as the net change in occupied space from one year to the next). 77 - Friday, November 14, 1986 — North Shore News This, combined with new supply, means that the overall office vacancy rates in many centers only will be marginally lower, or remain static, at 1986 levels, In many centers, sublet space, aS a percentage of available supply, is on the increase, This largely is a reflection of the willingness of landlords to assume ex- isting lease obligations in order to attract tenants. As in 1986, renovation and upgrading of class B and C ofiice space will be a high priority for landlords who are aggressively courting new and existing tenants. Heightened development and leasing activity in many suburban office markets across Canada is anticipated in 1987, This will occur for a variety of reasons, depen- ding on the location. For example, a lack of suburban office development in Montreal in the past few years, coupled with an in- creasing demand for such space, could trigger class A office development in that area. In Winnipeg and Halifax, growing interest in suburban office space is be- ing generated by owners/ users who place a high prior- ity on ample parking. STABLE SALES lf there is to be one com- mon denominator. in Canada’s commercial real estate markets during 1987, .. it will be the general health and stability of industrial sales and leasing. Following strong demand by owners/users in 1986, many industria! markets have experienced substantial increases in both land and building prices and lease rates. For example, in some areas of Markham, Ontario, near Toronto, land prices escalated as much as 60 per cent during 1986. While industrial sales and leasing activity in 1987 is ex- pected to remain buoyant, the survey anticipates that a more positive supp- ly/demand situation will be in place. The likelihood that interest rates will not decline much further should ease demand in 1987. See High Page 78 HURRY FOR BEST SELECTION Choose one of six 3 bedroom Townhomes from only $114,900 Check the competition — and compare! We don't think you'll find a better value in a brand new home. Exciting design. Super quality. From as little as $966 monthly. P.&{. with only 10% down. Best of all, it’s a Molnar! 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