The Canadian office real estate sector will experience more distressed asset sales over the next few years, says CBRE’s chairman.

The office market poses the largest refinancing risk as work patterns change, said Paul Morassutti during a presentation at the recent Vancouver Real Estate Forum. Office values will be lower than they have been over the past five years, making it harder for investors to obtain debt capital.

Many lenders are already avoiding office assets altogether, he added.

“None of the other sectors have this particular mix of ingredients,” he said. “The result will undoubtedly lead to more distressed sales, albeit to a much lesser extent than what we’re seeing in the U.S., since our banking system, relatively, is much more stable.”

But all of the dislocation will present an opportunity.

“We believe that the next few years may very well present an extraordinary buying window for well capitalized office buyers who have vision and a well defined strategy,” said Morassutti.

Canada, he contended, needs more office conversions to other uses.

“Removing non-competitive office space and replacing it with much needed residential housing is a policy no-brainer,” he said.

Calgary, where the municipal government has provided financial incentives for downtown office conversions, is leading the way in that area. But in most cities, conversion economics are challenging and further incentives are required, he asserted.

“Without them, the bulk of this activity will likely take place on the margins,” said Morassutti.,