Economic Indicators and Projections
2008 Closing Numbers
2008 World GDP Growth
*Source: IMF
Historical World GDP Growth
China opens IT Crisis
S&L Crisis (90) S&L Crisis
(80)
End of USSR
According to the IMF, GDP growth, for advanced economies, will be the lower than in the last 20 years (1%), but will pick up at the beginning of 2010.
*Source: IMF
2008 World Stock Markets
Regions
-50.61%-49.17%
-39.78%
-47.41%-50.15%
-60.00%
-50.00%
-40.00%
-30.00%
-20.00%
-10.00%
0.00%
MiddleEast /Africa
Asia /Pacific
Europe America World
World’s Least and Most
-65.39%
-51.84%
-39.08%
-31.03%
-22.13%
-47.41%
-36.20%
-67.29%
-80.00%
-70.00%
-60.00%
-50.00%
-40.00%
-30.00%
-20.00%
-10.00%
0.00%
Russia China India USA Canada Britain Chile World
In December 2008, all stock markets regained on average 7%. China was the only market that continued to lose (8%).
*Source: Bloomberg
2008 Mature Stock Markets
-52.3%
-43.0%-42.7%-42.1%-41.2%-40.4%
-39.8%
-36.2%
-31.3%
-42.2%
-48.7%-46.3%
-60.0%
-50.0%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
Nethe
rland
s
Italy
Spain
Austra
lia
Franc
e
Japa
nBra
zil
Germ
any
USA
Canad
a
Britain
Avera
ge
*Source: Bloomberg
2008 – 2009 Job Loss
• For both Canada and US, the largest job losses have occurred since September 2008.• Canada’s biggest loss was duirng the period of December 2008 to January 2009: 129,000 jobs. • December 2008 saw a big loss of full-time jobs but was offset with a gain in part-time jobs.• In December 2008, Alberta and Quebec had the biggest losses of full-time jobs. • The US had increasing unemployment throughout the period.
*Source: US Labor force Organization & Human Resources Development Canada
Jobs LostUnemploymentRate Change
(Jan. 2008 – Mar. 2009)
UE Rate
Canada 295,000 1.50% 7.7%USA 4,100,000 2.80% 8.1%
Trends
Canadian Key Interest Rate
The average duration of a crisis is 2.5 years.
IT crisis did not greatly affect consumer spending.
In January 2008, interest rate was 4.5%.
Since then, there have been 6 drops to the interest rate.
Current key interest rate: 0.5%
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
1935
1938
1941
1944
1947
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
WW II Ends
IT Crisis
S&L Crisis
S&L Crisis
*Source: Bank of Canada
CAN GDP Growth vs. Key Interest Rate
In the ’80s and ’90s interest rates reacted late to the change in GDP growth.
Negative GDP growth lasted 1 year in major crisis.
Slowing of growth was seen 2 years before reaching negative numbers, but improved within 1 year.
-5.00
0.00
5.00
10.00
15.00
20.00
19711973
19751977
19791981
19831985
19871989
19911993
19951997
19992001
20032005
2007
Int. Rate
GDP GROWTH
IT CrisisS&L Crisis S&L Crisis
Free Trade with US.
*Source: Bank of Canada: Trading Economics
Canadian Trade
Both imports and exports behave similary.
They diminish during a crisis, obtaining negative changes just for 1 year and picking up normal growth after the 2nd year.
% Change
*Source: Stats Canada
IT CrisisS&L Crisis
S&L Crisis
-0.2
-0.1
0
0.1
0.2
0.3
0.4
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Exports of goods
Imports of goods
Stock Index
Crisis lasted 2 years.
2008 brought us back to 1998 and 2002 values.
*Source: Bloomberg,: Djindexes: Euroinvestor
0
50
100
150
200
250
300
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
X 1
00
Dow
Nasdaq
DAX
FTSE
TSX
S&L Crisis IT Crisis
Unemployment Rate
Crisis lasted 2 years.
During the S&L crisis, unemployment in Canada took 1 year longer than the US to recover.
IT crisis was harder for US.
Canada: 7.7%USA: 8.1%Montreal: 7.5%Quebec: 7.9%
*Source: US Labor force Organization: Human Resources Development Canada, Canada Stats, Institute de la Stadistique, Quebec.
IT crisisS&L Crisis
S&L Crisis
0
2
4
6
8
10
12
14
Canada
USA
Montreal
Quebec
IT Crisis
*Source: US Labor force Organization: Human Resources Development Canada, Canada Stats, Institut de la Stadistique, Quebec
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Unemployment Rate by Province
•Currently Quebec is 0.2% over the country average.
•Quebec has had one of the lowest percentage changes in the last year.
*Source: US Labor force Organization: Human Resources Development Canada
UE Rate
15.1
12.3
8.8 8.87.9
8.7
4.8 4.75.4
6.7
0
2
4
6
8
10
12
14
16
Newfo
undla
nd
and
Lab
rado
rP.E
.I.
Nova
Scotia
New B
runs
wick
Quebe
c
Ontar
io
Man
itoba
Saska
tchew
an
Alberta
British
Colu
mbia
1 Year Unemployment Change
2.1
2.4
1.1
0.5
0.9
2.6
0.6 0.6
1.8
2.5
0
0.5
1
1.5
2
2.5
3
*Source: Labor Force Survey.
% C
han
ge
Newfo
undla
nd
and
Lab
rado
rP.E
.I.
Nova
Scotia
New B
runs
wick
Quebe
c
Ontar
io
Man
itoba
Saska
tche
wan
Alberta
British
Colum
bia
Greater Montreal Office Vacancy Projection
Vacancy rate is strongly influenced by construction. Correlation between unemployment and vacancy rate is:Every 1% change in unemployment represents 2% in vacancy.So for Government forecast of 2009 with unemployment at 7.5% vacancy at end of year would be 8.6%.
At the end of a 2 year crisis, vacancy rate would be 9.6%, with a spread of 2% depending on UE rate.
8.8
7.87.5
8.1
10.3
11.211.4
10.4
9.5 9.69.1
8.3
7.6
6.87.2
7.7 7.67.2
6.86.3
6
7.27.5
9.4
88.6
10.1
13.4
15.415.916 16.116.3
15.5
14.2
13.1
12
11.1
12.05
13.513.8
12.6
11.5
9.1
6.4
8.28.1
9.6
0
2
4
6
8
10
12
14
16
18
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
-600,000
-100,000
400,000
900,000
1,400,000
1,900,000
2,400,000
UE CAN
Vacancy Rate
New Supply
IT Crisis2. S&L Crisis Projection
*Source: HR D Canada: Colliers Research
Downtown Values
•As Montreal is mainly a Downtown office market same correlation was used, assuming no new supply until 2013.
•Negative values in new supply are due to office buildings that have been converted into Hotels or Residential.
Year New Supply (sq. ft.)
Project
2008 -
2009 - 2010 - 2011 - 2012 - 2013 600,000 Magil Laurentienne2014 375,000 Hines - SITQ2015 500,000 WestCliff - Cite Int. II
Expected Construction Year
Vacancy Rate
1999 40,000 547,000 13.1%2000 345,000 1,002,000 12.0%2001 223,546 635,061 11.1%2002 (212,522) (649,606) 12.1%2003 1,174,249 312,591 13.5%2004 359,792 361,246 13.4%2005 (133,568) 266,271 12.6%2006 - 848,948 10.9%2007 (234,500) 1,107,831 8.3%2008 - 1,672,423 4.9%
Average 156,200 610,377
MONTREAL DOWNTOWN New Supply(sq. ft.)
Absorption(sq. ft.)
Year Absorption (sq. ft.) Vacancy Rate
2009 (640,000) to (1,100,000) 6.3% to 7.3%
DOWNTOWN PROJECTION
Montreal Office Rate Projection
The historical average correlation between vacancy rate and NER is:Every 1% change in vacancy represents $ 0.80/SF in NER.
For 2009 NER should range from $13.00 to $15.00.
9.4%
7.9%
8.6%
13.4%
16.3%
15.5%
14.1%
13.1%
12.0%
11.1%
13.4%
12.6%
9.1%
6.4%
8.1%
10.1%
16.1%
16.0%15.7%15.4%
10.9%
13.5%
12.1%
9.6%
$13.50
$15.50
$18.00
$15.00
$12.00
$7.87
$4.04$5.00
$5.75$6.80
$8.50
$11.50
$14.00 $14.00
$12.00$12.70
$4.38
$16.00$16.00
$14.00
$12.00
$13.55$14.15
$15.75
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
-$5.00
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
Vacancy Rate
NER A class
Projection
*Source: Colliers Research
•Only Toronto and L.A. are mostly Suburban markets.
•Smallest markets: Calgary and Montreal.
32
442
129
49
85
34
362
105
23
95
21
205
804
234
180
54
173
72
0
100
200
300
400
500
600
700
L.A. CHICAGO MONTREAL TORONTO CALGARY
CBD INVENTORY
SU INVENTORY
T INVENTORY
Major N.A. Office MarketsMarket Size in M. SF
* Source: Colliers N.A Research
NY /
NEW JERSEY
•Downtown with highest rental rates: New York, Calgary, Toronto.
•Suburbs with highest rental rates: Calgary, Los Angeles, Toronto.
•Montreal is in a good position because it has a healthy vacancy rate.
* Source: Colliers N.A. Research
$40.00
$30.70 $29.80
$58.00
$36.50
$74.00
$52.20
$29.50 $28.00
$21.70
$38.00$38.50
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
$70.0
$80.0
$90.0
L.A. N Y / NEW JERSEY CHICAGO MONTREAL TORONTO CALGARY
CBD Gross Rental Rate
Suburban Gross Rental Rate
Major N.A. Office MarketsRental Rates
•CBD: Average gross rental rate for Class A buildings excluding tenant improvements.
•Rates for US cities in US $. Rates for Canadian cities in CAD $.
•Vacancy rates have gone down in cities coming from high vacancy rates and diminishing construction.
•All cities have experienced a decrease in absorption.
•US cities have experienced a decrease in absorption since 2007 whereas Canadian cities just in the last 2 quarters.
* Source: Colliers N.A. Research
7.69
1.66
0.32
3.21
4.7
13
14 14.2
15.8
16.717
15
13.913.8
11.5
9.1
6.4
10
8.5
7.6
5.9
16.49
17.5
12.6
4.6
0
2
4
6
8
10
12
14
16
2004 2005 2006 2007 2008
CALGARYL.A.CHICAGOMONTREALTORONTO
Major N.A. Office MarketsHistoric Vacancy Rates
Summary
•There are correlations between GDP growth, stock prices, unemployment rate and RE.
•Previous crisises had an average duration of 2 years.
•Bottom should be hit at end of 2009 or into mid-2010 with a slow recovery.
•Montreal and Canada are in a better position than the US, so fall should not be as hard.
•Change in absorption is felt immediately.
•Vacancy rate for 2009 should be between 7.6% to 8.6%.
•NER for Class A Building: $13.00 to $15.00.