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Speaker Presentations:
Andrew Warren
George Carras
John O’Bryan

Videos:
2014 Emerging Trends in Real Estate
GTA Housing & Dev’t Market Overview
Canadian Market Overview

“The Canadian market is in a good balance.  A nice sweet spot.”

The results are in and the message is clear: not only does the Canadian real estate market continue to attract positive and even enthusiastic attention from both domestic and international investors, but signs are showing that even the U.S. market is slowly gaining momentum.

This positive tone was the basis of a morning of analysis and commentary by Andrew Warren, director of real estate research for PwC and one of the authors of the annual Emerging Trends in Real Estate report, to a crowd of over 300 real estate professionals at the Design Exchange in downtown Toronto on November 12. His positivity was later echoed by George Carras, president of RealNet Canada, and John O’Bryan, chairman of CBRE Ltd. and Urban Land Institute’s first Canadian Trustee.

Carras reported that the market still tends to exhibit a “fear versus risk” mentality, characterized by people who have fear because they do not know the facts or they know some facts and therefore perceive high risk. His advice was clear: be aware of the statistics and put them into perspective. “The Toronto market will grow by 2.5 million by 2035,” says Carras, and those people will be living in high rises at high cost in order to accommodate the high population. Already “the residential market in Toronto has the highest number of high-rises under construction in North America,” he noted.

Even so, Toronto dropped to the fifth position in the report’s Markets to Watch. The West continues to be where growth will take place. Calgary in particular is the unanimous choice as “top market” for investment, development and homebuilding. The other leaders continue to be Edmonton, Saskatoon and Vancouver. Toronto has an average score for investment and development for 2014.

The unanimous theme for 2014 was that Canada’s real estate and economic markets will remain steady, allowing for a strong commercial and condominium market. “The infrastructure is quite robust and this leads to jobs,” says O’Bryan. While there is credit available in the market, providers will be more conservative in their release of funds, and not all capital providers will be available to all users.

“REITs have outperformed in the last 10 years but they are coming back to Earth,” noted O’Bryan, going on to say that REITs will continue to be strong but much more critical of what is available to buy in the market place. With more REITs entering the market such as Choice and Canadian Tire there may be more options. Additionally, cap rates continue to be low but there is no tolerance for risk.

Pension funds would like to grow but the growth is outside of Canada. The report cites San Francisco, Houston and Miami as the markets south of the border worth looking at to invest. Retail is incredibility well-balanced with low vacancy rates and a positive outlook, with urban and infill retail looking extremely attractive since there is not much space left. With the stable Canadian market international retailers are still making their way into the market.

According to the presenters, there is a boom in commercial office with four per cent of inventory still under construction in mid-2013. The interesting note of this cycle is there is more development in the downtowns and the new buildings are full, and prices are expected to remain the same at record high levels. Equally, industrial markets will be leading the way in investment and development for 2014, as this sector is rising at the same level as the apartments sector was last year. For long term investment industrial real estate does well and will continue to do well for 2014.

Canada will be a repeat story on the real estate market, unlike the United Kingdom and American markets, which “come with risk,” cautions Warren, and are still recovering from their recoveries. The Canadian market will continue to be the steady market in 2014, a calculation that should be met with enthusiasm as the U.S. and U.K. markets stagger through their rehabilitation.

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