Although new data released Monday show commercial property transactions fell by half in Canada in the first six months of 2009, it is now clear the downturn for the industry will not be as bleak as the devastating slump seen in the early 1990s, said John O’Bryan, vice-chairman of commercial real estate services firm CB Richard Ellis Ltd.

The data also suggest Canada’s commercial real estate sector will not be hit as hard as the U.S. industry this year.

“We were so much more restrained this time around,” Mr. O’Bryan said yesterday.

Aside from some excess growth in Calgary and downtown Toronto office markets, Mr. O’Bryan argues most sectors of the commercial industry – including retail, industrial and multiresidential – were not overbuilt over the past decade.

That’s because lenders adopted strict financing rules after the collapse of the early 1990s, and because more commercial property is owned by large institutional investors such as pension funds, which take a cautious approach to growth.

“Between the institutionalizing of the business and the lenders having long memories and fairly strict guidelines which they’ve stuck to, you’ve had a lot more restraint,” Mr. O’Bryan said.

“And that is a big differentiator from the U.S., where there was a lot more speculative building. That’s why their part of this cycle is going to be a lot longer than ours.”

Still, Canada’s commercial real estate sector is far from unscathed in this recession.

The latest CB Richard Ellis data show commercial real estate deals completed in the first half of 2009 totalled $4.9-billion, down 51 per cent from $10-billion in the same period last year. The number of deals dropped 38 per cent to 1,569 from 2,542 in 2008.

Toronto and Calgary were Canada’s worst-hit markets. Calgary has seen a major “deceleration” of its real estate boom with the slump in the energy sector, although Mr. O’Bryan said the market is always able to recover when oil prices surge. Calgary deal values slumped 78 per cent in the January-to-June period, totalling just $471-million, compared to $2.2-billion last year.

Toronto saw total deal values fall 66 per cent in the first six months of this year, due in large part to a lack of properties being put on the market and to declining valuations in both the industrial and office sectors. There were 287 deals totalling $1.27-billion in the Toronto market in the first half of 2009, down from 676 deals worth $3.7-million in the same period last year.

Mr. O’Bryan said many owners are reluctant to list properties during the slump if they can avoid selling, and are unhappy with the offers they are receiving from buyers.

“What’s different about this [downturn] than the last time is that there is far more institutional money in the market, and that money tends to be a lot more patient and will wait it out,” he said.

He said potential sellers are “looking in the rear-view mirror” to see where prices were recently, while buyers “tend to be looking forward” at valuations. He said that means many sellers without financing problems are preferring to wait and see if there is a price recovery.

“It’s hard to bring those two forces together unless there’s pressure, and there hasn’t been as much pressure as people thought there would be.”

Vancouver has been the least affected of Canada’s major markets, thanks to a long-term lack of supply due to significant development constraints in the city. In the first six months this year, Vancouver accounted for one-quarter of all of Canada’s commercial real estate deals, totalling $1.2-billion, down 22 per cent from the same period last year.

Mr. O’Bryan said investors prefer markets such as Vancouver, where there is limited ability to develop new properties and prices remain relatively stable even in periods of downturn. The largest deal in Canada so far this year was the all-cash sale of the Bentall V office building in downtown Vancouver to a German investment firm for $297-million.

One of Toronto’s largest home builders will start fresh and develop a new mixed-use condominium at the site of the 1 Bloor luxury condo project after buying the property from its cash-strapped developer.

Great Gulf Homes confirmed Thursday it will take ownership of the site from Kazakhstan-based Bazis International Inc. in mid-September, writing a new chapter in a cautionary tale of marketing hype, frenzied sales and the crush of the global credit crisis.

Toronto’s real estate world buzzed with word of the sale, as realtors fielded calls from anxious buyers concerned about deposits and the future of the project – once envisioned as Canada’s tallest residential building – at the corner of Yonge and Bloor Streets.

“An affiliate of Great Gulf Homes has entered into an agreement to purchase the property and it will be closing mid-September,” said Bruce Freeman, executive vice-president of Great Gulf. “We are presently developing plans for a mixed-use project.”

He declined to elaborate, saying more details would be released after the deal closes, but The Globe has confirmed the purchase is strictly for the land and does not involve the previous owner’s obligations, contracts or design.

In a terse statement, Bazis said all buyer deposits are protected in an escrow account, as required under Ontario’s Condominium Act. A spokeswoman said neither she nor Michael Gold, the developer’s Canadian president, could comment further because of a confidentiality agreement.

The original plan for 1 Bloor, seen above, has now been scrapped and doubt now lingers over the entire project.

Buyers lined up for days in 2007 when units in the planned 80-storey, $450-million skyscraper first went on the block. About 500 purchasers signed deals ranging from $400,000 to several million. The average buyer has $80,000 to $120,000 invested.

Anna Cass of Royal LePage Your Community Realty was one of 1 Bloor’s top sellers, and bought a unit for herself. To guarantee herself a piece of the project, she rented hotel rooms, dressed in disguise and hired students to camp out in the days before it went on sale.

Ms. Cass said people still want the prestigious corner location. She urged Great Gulf to “be fair” and consider 1 Bloor buyers first for its new project.

“If Great Gulf is smart … they will offer all the agents and their buyers first crack and first discount, at a very good rate,” she said.

Great Gulf has been involved in about 10 major condominium projects in the Greater Toronto Area in recent years.

Garth Juriansz of Re/Max Realtron Realty, who also bought for himself at 1 Bloor and sold several units to clients, said he’d take his buyers elsewhere if Great Gulf starts anew with “inflated” prices.

“It will be a significant mistake to throw all the people out and start again,” he said.

1 Bloor’s problems began last fall amid the U.S. subprime mortgage crisis and credit crunch, when Bazis’ partner in the land purchase, Lehman Brothers, went bankrupt. Mr. Gold sought new financing partners. In December 2008, he stopped making payments on a multimillion-dollar loan.

Local lenders bought the loan, then tried to place the project in receivership.

Last month, Mr. Gold agreed to sell the property as part of a court-approved plan to keep it out of receivership.

Gerry Miller, a real estate lawyer and partner at Gardiner Miller Arnold, said it’s uncommon in Toronto for a condo project that has been fully conceptualized and well sold to falter suddenly. However, he said he would have steered his own clients away from 1 Bloor. “It was too expensive and unlikely viable … it was just too big, too grand,” he said.