“We [Canada] expect nothing spectacular [in 2013], but if the world turns around we are in excellent position.” – Jonathan Miller, ULI
This is how Jonathan Miller, offering his American perspective and author of ULI/PwC’s “Emerging Trends in Real Estate ” publication, began his annual address to Toronto’s real estate community. Setting the tone of cautious optimism that would be echoed by the event’s other speakers, including George Carras, President of Realnet, a prominent real estate information company, and John O’Bryan, Chairman of CBRE, a leading real estate brokerage company. The event, hosted by ULI and held at the iconic Design Exchange in downtown Toronto, brought together the collective wisdom of Canadian real estate leaders with close to 400 real estate professionals in attendance to reflect and predict on trends in the real estate industry. ULI’s 34th edition of the “Emerging Trends in Real Estate” report served as key context during the day.
“If the iceberg rolls over I would still want to be here [in Canada].”
– John O’ Bryan, CBRE
Mr. O’Bryan emphasized that notwithstanding the possibility that the world economy could turn for the worse, amidst continuing sovereign debt struggles in Europe and the impending U.S. fiscal cliff, the Canadian real estate economy would still be his location of choice. Driven by influences that have been well-established in the current real estate cycle, he stated that “stable fundamentals (low vacancy rates, constrained supply of investment product, cheap debt), disciplined lending practices, and strong immigration and thus employment to Canada’s major cities” have affirmed his enthusiasm. This environment has fuelled the “best first half in terms of investment volume on record with $14.3 billion of commercial transactions,” he said. Continuing, he felt that the investment market has been buoyed by ideal REIT buying conditions such as, “little risk in cash flows, open capital and debt markets, and a steady supply of sellers looking to rebalance their portfolio or repatriate their money into foreign markets.” With all these positive indicators, it comes as no surprise that 2012 is on pace to be the “second best year ever on record,” according to Mr. O’Bryan.
With exceptionally strong real estate investment markets, the focus of the discussion transitioned to the elephant in the room, Toronto’s softening condominium market.
“The condo market is suffering from information malnutrition”
– George Carras, Realnet
Mr. Carras, coined the term “information malnutrition” to describe the current perception of the condominium market fuelled by cheap information and statistics that “[is] analogous to someone consuming a junk food diet and paradoxically thinking they are healthy because they are full, only to get sick days later due to a lack of nutrients.” Mr. Carras delivered a clear warning to be critical of the statistics utilized by the media and to always put statistics in perspective. “Newspaper headlines have reported that year-to-date (Q3-2012) high rise sales are down by 30%, however last year was a record year, and 2012 has actually seen the 3rd best year for high-rise sales on record,” he stated. This message was echoed by John O’Bryan as he described a “fear versus fact” mentality in 2013 and the potential damaging implications of lowered consumer confidence on not only the condominium market, but also the commercial markets.
Turning the discussion out west to the strongest real estate market in Canada easily drew consensus from the panel and was perhaps best described succinctly by Mr. Miller.
“The trend is West is Best” – Jonathan Miller, ULI
Mr. Miller identified Central Canada as no longer being the darling of Canada as Western Canada continues to benefit from an energy boom with rising numbers of new immigrants arriving in Calgary and Edmonton to reap the rewards of a constrained labour market.
The west’s rising tide has floated all boats, with the west specifically benefitting from significantly higher industrial face rates, office and industrial construction (as a per cent of inventory) and decreasing vacancy rates compared to the east, according to Mr. O’Bryan.
With a strong commercial market and a condominium market outlook not as ominous as many would believe, plus a steady economy, the panellists were unanimous as to Canada’s overarching theme in 2013.
“The Beat goes on” – John O’Bryan, CBRE
While Canada has had the same real estate story, more or less, for the past several years, as the “winner of the reverse beauty contest” this should be met with enthusiasm as other international markets continue to stumble over relative uncertainty. Sometimes, boring is better.
Braiden Goodchild
ULI Communications Committee
PricewaterhouseCoopers Real Estate
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SPEAKER PRESENTATIONS
Jonathan Miller, Author of the Emerging Trends Report
George Carras, President, RealNet
John O’Bryan, Chairman, CBRE Ltd.