Chris Langstaff of LaSalle states, “Although Canada’s economy - and by extension its real estate market - survived the Great Recession of 2008-2009 remarkably well compared to many other nations, the recession was less benign for Canada’s trade sector:”  Export volumes dropped significantly enough to push Canada into a trade deficit in 2009, for the first time since 1976.  Though the trade deficit has continued into 2011, a trade surplus is forecast to emerge later this year and successively strengthen over the next four years, hitting $45 billion (USD) by 2014, thus returning Canada’s trade surplus to pre-recession levels of 2008.

Import volumes are also forecast to grow over the next five years, particularly for Machinery and Equipment and Consumer Goods. A $27.0 billion increase in machinery and equipment by 2015 combined with a $17.0 billion increase in consumer goods imports over the same period will drive real estate demand in two ways:  Vancouver will see increased warehouse demand due to fast growing imports from Asia and the warehousing sectors in Canada’s largest markets of Toronto and Montreal will see rising demand due to an increased flow of imported goods from the United States, and to a lesser extent, Europe.

Most importantly, an expected shift to energy and natural resources as a greater proportion of Canada exports relative to manufacturing will have implications for the attractiveness of major real estate markets in the country.  Specifically, growing demand for commodities and energy from Asian economies will positively impact the real estate fundamentals and investment prospects for industrial and office properties in the western markets of Vancouver, Calgary and Edmonton.  

Over the longer term, new foreign oil sands investments will ultimately bring a strong and stable demand element to Edmonton’s industrial market. The large warehousing market of Toronto, and to a lesser extent Montreal, will be the main beneficiaries of rising imports. Vancouver will be the biggest beneficiary of growing foreign trade with Asia over the longer term, both for the shipping of export products out of British Columbia, but also for receiving Asian imports at its major port.

With forecasts suggesting Canada’s dollar will continue to rise in value vis-à-vis the U.S. dollar in the coming years, it is likely that demand for manufacturing exports will remain subdued.  Langstaff comments, “Real estate investors in Canada are advised to carefully consider the specific business sector in which existing and prospective tenants operate, particularly in cases where a tenant’s business is heavily dependent on manufacturing or export growth.  We are not suggesting that all manufacturing-oriented tenants be ruled out, but additional due diligence or credit enhancement may be warranted.”