Commercial real estate leaders' pessimism reaches 2009 levels

REALpac's sentiment survey reveals Canada's commercial real estate leaders concerns about the economy, interest rates and asset prices

TORONTO, May 21, 2013 /CNW/ - Despite continuing strong market fundamentals for real estate, commercial real estate leaders' are more pessimistic about the future than they have been since 2009 due to rising concerns about the state of Canada's economy, according to the Second Quarter 2013 Canadian Real Estate Sentiment Survey released today by The Real Property Association (REALpac) and FPL Advisory Group.

The quarterly survey measures the current and future outlook of Canada's top commercial real estate executives regarding overall real estate conditions, real estate asset values, and availability of capital. Top findings for 2013's second quarter included:

  • The Q2 index of executive sentiment fell to its lowest level since 2009, due to concerns about the state of the Canadian economy

  • Many Canadian market participants cite the future interest rate environment as an area of anxiety

  • While real estate continues to trade at compressed cap rates, views regarding the sustainability of current asset pricing are mixed

  • Debt is still seen as widely available; lenders are eager to lend and continue to search for returns

  • Equity capital is also plentiful as investors continue to turn to real estate in search of higher returns.

"Canada's real estate industry has been on a tremendous run since 2009 and the question we keep hearing is how long will it last?" said Carolyn Lane, Vice-President, Membership, Marketing and Communications of REALpac. "Our members are keeping a close watch on interest rates, economic growth here and in the U.S., and also debating whether asset prices can keep rising."

The survey's mixed findings were echoed by respondent comments such as:

"In Canada, property markets are very stable but the economy itself isn't great. I've felt since mid-last year that Canada is sort of flat. It worries me going forward."

"Canadian fundamentals are quite good with demand and supply in balance. Development is ramping up, and access to debt and equity has never been better or cheaper; this continues to push rates down and prices up."

"The market, I believe, is just not sustainable. There may be a slight correction or slow down. The rates and terms are excellent; I just don't know how that's going to last."

"Real estate investment opportunities in many parts of the United States continue to become a more compelling part of the opportunity landscape. Talent and capital will pursue those opportunities, to an extent, while the Canadian markets cool in response to a weaker economic climate, concerns over eventual higher interest rates, and the sustainability of currently low cap rates."

The REALpac/FPL Canadian Real Estate Sentiment Survey is the industry's most comprehensive measure of senior executives' confidence in the Canadian commercial real estate industry. This quarterly survey of CEOs, presidents, board members and other executives connected to the real estate industry measured executives' current and future outlook on three topics: overall real estate conditions; access to capital markets, and; real estate asset pricing. Survey respondents represent the retail, office, industrial, hotel, multi-family, residential, and seniors residential asset classes.

To download a copy of the Canadian Real Estate Sentiment Survey, go to www.realpac.ca > Publications > Canadian Real Estate Sentiment Survey (http://www.realpac.ca/?page=CanadianRealEstateSS).

About the Real Property Association of Canada

REALpac is Canada's premier industry association for investment real property leaders. Our mission is to collectively influence public policy, to educate government and the public, and to ensure stable and beneficial real estate capital and property markets in Canada.

REALpac members currently own in excess of $180 Billion CAD in real estate assets located in the major centres across Canada. Members include real estate investment trusts, publicly traded and large private companies, banks, brokerages, crown corporations, investment dealers, life companies, lenders, and pension funds. For more information, please visit us at www.realpac.ca.

About FPL Advisory Group

FPL Advisory Group (FPL) is a family of companies focused on providing highly specialized advisory services to the real estate and related operating and financial services industries. Through our complementary practice areas, we work with our clients to develop the right talent, leadership, structure, and strategies for success in today's intensely competitive marketplace.

FPL is comprised of two primary operating companies that work together to serve a common client base. Ferguson Partners provides executive, director, and professional search services.  FPL Associates provides a range of specialized consulting and finance-related services in the areas of compensation, management consulting, executive onboarding, and succession planning. The firm is headquartered in Chicago and maintains offices in London, New York, Boston, and Tokyo. For more information, please visit www.fpladvisorygroup.com.

SOURCE: Real Property Association of Canada

For further information:

Carolyn Lane, Vice-President, Membership, Marketing and Communications, REALpac, 416-642-2700 x 223

Julia St. Michael, Manager, Research & Environmental Programs, REALpac, 416-642-2700 x 237

Erin Green, Senior Associate, FPL Associates L.P., 888-368-6598 (toll free).

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Real Property Association of Canada

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