Chris Langstaff, Canadian Research and Strategy, LaSalle Investment Management, comments: “While potential risks still do loom relative to further disruption and ripples in the credit markets, Canada’s strong domestic economy is supporting healthy property market fundamentals in the majority of major and secondary markets we have been monitoring. 

“Core pricing remains strong but higher risk properties in secondary locations have come under pressure given a more stringent lending environment.  Core cap rates will remain flat but we expect secondary properties will experience moderate cap rate increases going forward.”

Property Sectors and Markets

 Supply and demand remain balanced in the Canadian office market.  Canada’s vacancy rate stood at 7.0 percent in Q108 – the same level as year end of 2007, despite the completion of 1.5 million square feet of new supply in the quarter.  New supply levels in full year 2008 and 2009 will be as high as they have been in six years, yet still remain near only 2.0 percent of total inventory nationally. (See chart below)

 The industrial market remains strong in each of the major markets.  Cities with high exposure to the export sector, including autos and other types of manufacturing, will come under increasing pressure if the US recession continues beyond the next few quarters.

 Urban located retail and value-add retail opportunities in secondary, and sometimes even tertiary markets, are showing strength.  With solid domestic demand, Canada’s retail sales are expected to continue to grow at a healthy pace in 2008, keeping retail vacancy at a manageable 5.0 percent and presenting solid investment choices for 2008.

 Western Canadian markets continue to outperform their eastern counterparts both in economic fundamentals and in rent growth.  We believe this region still has several strong years ahead of it.  Saskatchewan has also started to benefit from the natural resources boom and is capitalizing on its own oil sands and potash deposits.  Value-add opportunities may be available in Regina and Saskatoon, as cap rates in those cities have only recently began to feel the downward pressure experienced by their more affluent neighbors to the west.

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About LaSalle Investment Management
LaSalle Investment Management, Inc., a member of the Jones Lang LaSalle group (NYSE: JLL), is a leading global real estate investment manager, with $50.4 billion of assets under management. LaSalle Investment Management is active across a range of real estate capital and operating markets including private and public, debt and equity.  LaSalle Investment Management is authorised and regulated for investment business in the UK by the Financial Services Authority.  For more information, visit www.lasalle.com.