2010 Global Market Report - NAI Commercial Real Estate

Halifax, Nova Scotia, CanadaOttawa, Ontario, CanadaContactNAI Turner Drake& Partners Ltd.+1 902 429 1811Country DataAreaGDP Growth (%)GDP 2008 (US$ B)GDP/Capita (USD)Inflation Rate (%)UnemploymentRate (%)Interest Rate (%)9,200,000-2.48%$1,319.14$39,217.290.15%8.33%0.25%Population (Millions) 33.637Halifax Regional Municipality (HRM) is the economic hub ofAtlantic Canada and appears to have weathered the currentglobal financial crisis better than other parts of the country.Perhaps this is because HRM has the Canadian Navy’s EastCoast base, is the location of many federal governmentoffices and six universities, and as a result is home to a largeconcentration of educational, medical and research facilities.The vacancy rate for all classes of office buildings is up thisyear to 7.44%, an overall increase of 1.2%. The currentvacancy rate for Class A space is 4.97%, Class B 8.38%and Class C 7.17%. Although several projects have beenapproved for the CBD, rental rates need to be at least$25/SF net to make construction worthwhile. Class A rentscurrently are at $18/SF. However, office developmentcontinues in the suburban market where land is cheaper.Construction has recently commenced on a 15-acre siteknown as The Wright and Burnside Business Campus. It willinclude six office buildings totaling 400,000 SF.Warehouse vacancy is up in HRM to 8.14% overall and netrental rates have remained virtually unchanged from lastyear. Burnside/City of The Lakes is the largest of HRM’sindustrial parks and has a 4.91% vacancy. There are severalnew buildings under construction for owner/occupiers inthis Park.On the retail front, Dartmouth Crossing continues to expandits retail park. Costco recently opened its second HRMlocation here and Hampton Inn and Suites welcomed its firstguests earlier this year. Bedford Commons, also known asNorthGate Power Centre, a retail project, is under construction.Wal-Mart, Canadian Tire, Future Shop and other nationalretailers are due to occupy space in this development. Thereis a shortage of available investment product and the markethas been slow.Council passed “HRM By Design” a blueprint for the futureof Downtown Halifax. The plan is a balance between heritagepreservation and growth. Plans were unveiled recently for anew Trade and Convention Centre in the Halifax downtown.Also in the works is a new commercial/residential subdivisionin Bedford West.ContactNAI Commercial Ottawa+1 613 230 2100Country DataAreaGDP Growth (%)GDP 2008 (US$ B)GDP/Capita (USD)Inflation Rate (%)UnemploymentRate (%)Interest Rate (%)9,200,000-2.48%$1,319.14$39,217.290.15%8.33%0.25%Population (Millions) 33.637The Ottawa Federal Government has been hiring steadily, withan expectation that hiring will be reevaluated based on theeconomic setback of 2009. The high-tech sector continues tostrengthen; sector employment numbers are now exceedingthe exaggerated pre-high tech bust of 2000. Although thepublic sector and high-tech sectors are still growing soundly,this growth is being offset by downturns in other sectorsaffected by the global recession. Employment is expectedto remain stable.Growth in the local economy is expected to decline 0.5%this year before rebounding 3.1% in 2010. The industrialmarket performed well with inventory exceeding 22 millionSF. The overall vacancy rate, excluding Kanata, dropped tobelow 3.9%. With limited new construction, 2010 vacancyshould decline further and rental rates are expected toincrease. Larger industrial building space blocks are limited,rental rates have increased and demand is strong for highqualityhigh-ceiling modern industrial space.Office market inventory exceeds 47 million SF, with over 2.5million SF of vacant space; over half of this vacancy is inKanata (western suburban market). Vacancy rates elsewhereare in decline. Expectations in Kanata indicate a softening ofthe market with multiple companies, including Nortel’sdemise, offering space in the sublet market. In Ottawa core,a new 370,000 SF building was constructed by Ottawadeveloper Minto Group. The building is over 70% occupiedwith the remainder expected to be occupied by the Federalgovernment. Export Development Corporation will relocatewith a new high-rise tower of 535,000 SF under constructionby Broccolini in the core.The local retail market sustained a vacancy rate of 2.7%with an increase of 0.03% in the previous six months.Effects of the unanticipated Canadian dollar strengthening,and concerns over economic downturn, will not be reflectedin this sector. Vacancy rental rates continued to escalatewith rates averaging $19.75 SF. New retail construction hasadopted a “wait and see” approach. There continues to bedevelopment of small neighborhood infill projects servingthe rapidly growing suburbs.Long-term investors are keeping a large percentage of capitalon the sidelines. Substantial assets offered for sale arebeginning to receive attention. Capitalization rates increasedslightly. Offshore and international investors have expressedcontinued interest in low-risk products. It has yet to be seenif the extraordinary difficulty experienced in the capital marketswill alter commercial real estate markets in dramatic,unforeseen ways.Halifax At A GlanceConversion: .96 CDN = 1 US$ NET RENT/SF/YR US$ NET RENT/SF/YRLow High Low High VacancyDOWNTOWN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)SUBURBAN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)INDUSTRIALN/ACDN 31.22CDN 18.00CDN 26.50CDN 20.29CDN 13.50N/ACDN 34.89CDN 29.04CDN 26.50CDN 30.60CDN 29.75N/A$ 32.52$ 18.75$ 27.60$ 21.14$ 14.06$$$$$N/A36.3430.2527.6031.8830.99N/A2.8%3.4%32.0%7.5%12.4%Bulk WarehouseManufacturingHigh Tech/R&DRETAILCDN 6.55CDN 5.00CDN 7.65CDN 15.00CDN 16.00CDN 23.00$$$6.827.977.97$$$15.6323.9623.9610.7%6.5%6.7%DowntownNeighborhood Service CentersCommunity Power CenterRegional MallsSolus Food StoresDEVELOPMENT LANDCDN 35.00CDN 22.00CDN 28.00CDN 65.00N/ALow/AcreCDN 65.00CDN 28.00CDN 31.00CDN 75.00N/AHigh/Acre$ 36.46$ 22.92$ 29.17$ 67.71N/ALow/Acre$$$$67.7129.1732.2978.13N/AHigh/AcreN/AN/AN/AN/AN/AOffice in CBDLand in Office ParksLand in Industrial ParksOffice/Industrial Land - Non-parkRetail/Commercial LandResidentialN/A N/A N/A N/ACDN 239,580 CDN 326,700 $ 249,562.50 $ 340,312.50CDN 163,350 CDN 239,580 $ 170,156.25 $ 249,562.50CDN 270,115 CDN 521,413 $ 281,369.79 $ 543,138.54CDN 270,115 CDN 544,500 $ 281,369.79 $ 567,187.50CDN 206,358 CDN 317,117 $ 214,956.25 $ 330,330.21Ottawa At A GlanceConversion: 94 CDN = 1 US$ NET RENT/SF/YR US$ NET RENT/SF/YRLow High Low High VacancyDOWNTOWN OFFICENew Construction (AAA)N/A N/A N/A N/A N/AClass A (Prime)Class B (Secondary)SUBURBAN OFFICENew Construction (AAA)Class A (Prime)CDN 30.00CDN 18.00N/ACDN 14.00CDNCDNCDN35.0025.00N/A15.00$ 31.91$ 19.15N/A$ 14.89$$$37.2326.60N/A15.962.9%5.8%N/A7.6%Class B (Secondary)INDUSTRIALBulk WarehouseManufacturingHigh Tech/R&DRETAILCDNCDNCDNCDN9.004.007.008.00CDNCDNCDNCDN12.006.0011.0013.00$$$$9.574.267.458.51$$$$12.776.3811.7013.837.6%5.0%5.0%18.0%DowntownCDN 50.00 CDN 195.00 $ 53.19 $ 207.45 4.9%Neighborhood Service CentersCommunity Power CenterRegional MallsSolus Food StoresCDN 20.00CDN 35.00CDN 30.00N/ACDNCDNCDN35.0065.0068.00N/A$ 21.28$ 37.23$ 37.23N/A$$$37.2369.1569.15N/A4.3%1.2%1.0%N/ADEVELOPMENT LAND Low/Acre High/Acre Low/Acre High/AcreOffice in CBDLand in Office ParksLand in Industrial ParksOffice/Industrial Land - Non-parkRetail/Commercial LandResidentialCDN 17,000,000 CDN 17,000,000 $ 18,085,106.38 $ 18,085,106.38CDN 350,000 CDN 400,000 $ 372,340.43 $ 425,531.91CDN 275,000 CDN 375,000 $ 292,553.19 $ 398,936.17N/A N/A N/A N/ACDN 350,000 CDN 2,000,000 $ 372,340.43 $ 2,127,659.57CDN 375,000 CDN 3,000,000 $ 372,340.43 $ 2,127,659.572010 Global Market Report ■ www.naiglobal.com 39