Canadian Confidence in Real Estate remains high
Feb. 4, 2012
Canadian Confidence in Real Estate remains high
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In Canada, confidence remains high coming off good results in 2011, and as long as businesses and consumers remain motivated by the underlying fundamentals and not the headlines, the country’s markets can anticipate ongoing improvement.
Office
Leasing activity was strong across Canada’s office markets in 2011, with vacancy rates decreasing and rental rates trending upward in most markets nationwide.
Retail
The increasing number of new U.S. retail chains entering Canadian markets was noted in almost all cities as Canada’s relative stability, high consumer confidence and healthy retail spending, coupled with proximity to American distribution systems, boosted the country’s appeal for companies wary of further U.S. expansion. On the heels of Victoria’s Secret and Bath & Body Works opening stores in 2010, others followed. In 2011, Canadian consumers welcomed the likes of J. Crew, Express and Marshalls, to name a few. All this activity, of course, is paving the way for U.S.-based giant Target Corporation’s roll-out of roughly 135 stores in early 2013
Industrial
Vacancy rates are declining in most of Canada’s industrial markets as space is steadily absorbed. Stability and modest growth are reported across the country, with some markets anticipating the return of speculative development in 2012.
Investment
Unlike 2009 and the early part of 2010, when product and buyers were largely non-existent, the investment market is back and robust with the relatively ready availability of debt (due to continued historically-low interest rates) creating a large pool of buyers – particularly the Real Estate Investment Trust (REIT) sector. This situation has elevated prices to pre-credit-crisis levels in many markets. A limited supply of highly contested product – as witnessed by an increased number of bids – has resulted in further cap-rate compression
SUMMARY
In all, commercial real estate investment activity in Canada surged to almost $15 billion through the first three quarters of 2011 – nearly $2 billion, or 16%, higher than the same period one year prior. This figure could equal or surpass the $20-billion mark as there were a number of transactions in the final stage of negotiation during the closing months of 2011. For 2012, these trends are expected to continue, tempered only by a scarcity of high-quality assets and the spectre of international economic difficulties.
Review of the current marketplace:
In addition to the Vancouver area being positive and vibrant, based on past 2011 transactions, there is a wide variety of quality projects to suit every investors liking. At this time in January 2012, there are many projects for sale with solid income between $3,000,000 and $20,000,000. A small sample includes 2 Retail Stores or Plazas, 6 Industrial Warehouses, 2 Office Buildings, 4 Hotels, and 7 Multi Family (Apartment Buildings) investments.
