By Tara Vasdani, Borden Ladner Gervais LLP
On February 8, 2017, the Urban Land Institute held its first-ever breakfast event in the nation’s capital, highlighting the ULI/PwC Emerging Trends in Canadian Real Estate 2017 report and drawing a sold out audience of over 100 members of Ottawa’s real estate community. Hosted at the offices of Borden Ladner Gervais LLP, the event was moderated by Nadia King, Partner at PwC Canada, who was joined by a panel of industry leaders, including Susan Murphy, Vice President of Development at The Minto Group, Nathan Smith, Senior Vice President of Cushman & Wakefield, and Julianne Wright, Director and General Manager of Altus Group.
The discussion kicked off with highlights from the report and the overall market sentiment and view of the respondents based on trends evident in 2016. The topics that were discussed included housing affordability, technology, global economic and political uncertainty, and what King dubbed as “waiting for deals.” In the panelists’ opinions, these four trends over the past year clearly defined the year of the “permanent renter,” the emergence of more shopping occurring online, the continued weakness of oil and gas in Alberta — albeit with Canada still proving to be a safer investment than the post-Brexit United Kingdom and Europe — and new players with deep pockets on the investment front balanced by institutional investors.
Ultimately, 2017’s best bets lie in mixed-use/purpose-built properties, and multi-family homes. Being the offspring of Baby Boomer parents, the idea of the “permanent renter” and the yearning to live in what are now labelled as “18-hour cities” resonated greatly with me. Per the report, individuals no longer wish to live in the suburbs – but rather, cores where one can live, play, and work all in one space. While affordability remains an issue, concerns were addressed, in part, by condominium corporations and developers via “12-month rent” options in place of down-payments, and industrial investments and sponsorships that are occurring more and more frequently in multi-purpose builds.
On the commercial front, retail is becoming speedily irrelevant, while fulfillment properties — the key component of e-commerce supply chains — are becoming more prominent. The 2017 Emerging Trends report has a very clear conclusion — to preserve Ontario regional malls, $8 million in redevelopment, at least, would be necessary. So, what happens when a company is slow to react to emerging technologies and changes in consumer preferences? An interesting example was provided. When HMV first arrived on scene, it was regarded as revolutionary for transforming the landscape of vinyl to CDs. Today, HMV is in bankruptcy, due to its delayed reaction to shifting consumer preferences. Meanwhile, companies like Canadian Tire that were quick to embrace the change are thriving.
So, in the view of the panelists, what are the best bets in 2017? According to Altus Group’s Julianne Wright, an increase in the national average industrial investments will prove to be the most profitable. In a similar vein, Minto Group’s Susan Murphy said industrial investment would fuel the employment surge so desperately needed in Ottawa. For Cushman & Wakefield’s Smith, however, there is are no such opportunities — rather, market and demand lie in suburban offices, with investors hesitant to invest in industrial development where the regulatory environment is much stricter and the consumer much older.