We frequently read and hear from market participants that there is strong demand from investors and lenders for Class A, investment grade assets in strong locations. We don’t hear much about the mid-market office, retail and industrial properties that make up a significant portion of the commercial real estate market. From a Calgary perspective, these properties are facing significant challenges related to operating cash flows, valuation and capital structure. Many of these owners are struggling with two significant risks – cash flow risk and refinancing risk.

Base10 has recently been out in Calgary inspecting and reporting on a range of Class B and C office, retail and industrial properties on behalf of mortgage lenders. This has been a great opportunity to see first hand what’s happening on the ground with these properties. Although we read a lot in the newspaper about signs of economic recovery, remember that commercial real estate lags the general economy. In many cases, this has been very evident given increasing vacancy levels and decreasing lease rates.

For an interesting perspective on the status of the U.S. commercial real estate market, we take a look at the rate of delinquency for commercial real estate loans in the CMBS market. This delinquency rate reached 8.02% in April, up significantly from 2.45% one year ago and the highest rate in the history of the CMBS market. For more details have a read of Trepp’s latest Monthly delinquency report.

March jobs data was released this morning by Statistics Canada. The numbers were below consensus estimates and the jobs, hours worked and wages numbers continue to give us reason to be concerned about the demand for commercial real estate.

This research report issued by TD Bank last week is a must read for a look at Canada’s office markets. Regarding the Calgary commentary, use some caution in interpreting the high level data provided.

An article from Tuesday’s Globe & Mail titled “U.S. property plunge – how low will it go?” gives a great overview of commercial real estate issues in the U.S. Could we see similar problems in Canada?

From today’s Wall Street Journal…”Canada’s Proximity, Familiarity Lead Companies to Scout Locations There When Growth Farther Afield Seems Too Risky.”

Statistics Canada just released employment insurance data for January 2010. This data provides another perspective on unemployment, which is critical to the demand for commercial real estate.

This brief report was put out by Deloitte today and shares some insights into current market trends in the US. There are a lot of similarities to what we are experiencing here in Canada – declining real estate values, debt maturity and credit access, and stalled construction.

Canadian retail sales data were just released for January 2010 and made very strong headlines with a +0.7% month-over-month gain. Excluding auto sales, retail sales were up more than 1.8%, triple the consensus estimates. What do the details tell us about these headlines? As we’ve said in the past, things aren’t as strong as they may seem.