Times stay tough for Canadian commercial property

* First half 2009 deals down 38 pct from yr earlier

* Major obstacles to turnaround remain

TORONTO Aug 17 (Reuters) - Money was scarce and deals few in Canada's commercial real estate market in the first half of the year and recovery is likely to lag the turnaround in the residential sector, according to two reports released on Monday.

CB Richard Ellis (CBRE), the world's largest commercial real estate services firm, said the number of commercial transactions completed from January to June was 1,569, down 38 percent from 2,542 in the same period last year.

The value of the transactions shrank by 51 percent to C$4.9 billion ($4.4 billion) in the first half from C$10 billion in the year-before period, CBRE said in its Mid-Year National Investment Report.

"The global recessionary impact on the commercial real estate market has yet to run its course," said John O'Bryan, vice-chairman, CBRE.

In contrast, sales of existing homes are on a tear with the most recent figures showing a sixth straight monthly rise. [ID:nN14313402] Market watchers have credited a rebound in residential property sales, supported by low mortgage rates, with helping to put the Canadian economy on the road to recovery.

But in the commercial market, tight lending conditions and a lack of investor appetite for mortgage-backed securities are some of the obstacles that remain, PricewaterhouseCoopers said in a report.

PwC said that suburban office, hotel and industrial properties are among the most vulnerable in this kind of downturn.

"The credit crisis and ensuing recession have dragged commercial real estate markets into very trying times, marked by value losses, rising foreclosures, and reduced property revenues," said Frank Magliocco, partner and leader of PwC's Real Estate practice in Canada.

"There is simply scarce money and therefore limited buyers."

LIGHTER VOLUME

Nine major markets highlighted in the CBRE report showed lighter transaction volumes at midyear than at the same point a year earlier.

For example, Toronto generated C$1.3 billion worth of transactions, the highest of any market surveyed, on 287 completed deals. That compares with C$3.7 billion on 676 deals in the first six months of 2008.

There were 149 sales in the Calgary market worth C$471 million in the first half, down sharply from investments of C$2.2 billion a year earlier, when there were 281 transactions.

CBRE said Canada's commercial real estate market remains tied closely to global economic conditions and that foreign investment activity has been "predictably affected by the global recession almost nationwide".

($1=$1.11 Canadian) (Reporting by Ka Yan Ng; editing by Peter Galloway)