TORONTO, Nov. 5 /CNW/ - Leading real estate experts are predicting the US
commercial real estate market will slow in 2008 and follow a similar pattern
as the current residential market. However, according to the annual Emerging
Trends in Real Estate 2008 report, released by PricewaterhouseCoopers (PwC)
and the Urban Land Institute (ULI), their Canadian counterparts are much more
Now in its 29th year, Emerging Trends is the oldest, most highly regarded
annual industry outlook for the real estate industry. The report reflects
interviews with and surveys of more than 600 of the industry's leading real
estate experts, including investors, developers, property company
representatives, lenders, brokers and consultants in both Canada and the US.
Other versions of this report are conducted in countries around the world
including Asia Pacific and Europe.
According to Chris Potter, PwC partner and leader of the firm's Canadian
Real Estate Tax practice, Canada benefits from a more conservative investment
environment than the US. "In Canada, institution-dominated markets appear to
be avoiding 'transaction mania', but real estate values have reached record
highs and a strong economy has accelerated tenant demand for space."
According to American respondents, a healthy correction south of the
border will likely bypass long-term investors but penalize late-to-the-game
speculators and overleveraged buyers. Canadian respondents to the survey
remain positive about sidestepping any serious impacts of this possible US
correction. Close to 36% view their prospects for profitability in 2008 to be
very good and a further 22.4% say they're excellent.
The strongest areas of real estate business activity for Canadian
respondents is predicted to be within real estate services, followed by
commercial/multifamily development and homebuilding/residential land
development. All property sectors share positive prospects across the country
especially industrial and retail with respondents, on average, stating
development prospects are expected to be modestly good to good. The
residential for-sale market is also expected to fair well, but might need to
take a breather as homebuilders cannot keep up with the current pace and
single-family housing looks overpriced.
Office stock is seeing limited inventories and dated product fill up with
tenants. Except for Montreal, where office vacancies are nearing 9%. Canadian
metropolitan areas boast below 5% vacancies, and rents have room to push
higher. The survey is also showing that costs and land scarcity is limiting
new development. Hotel investment and development prospects are modestly good,
and most respondents rate this sector either a buy or a hold. Rental
apartments are doing well in major cities with high immigration flows. Primary
western cities - Vancouver, Calgary, and Edmonton - are veering toward housing
shortages as workers, attracted by a plethora of well-paying jobs, pour into
the energy zone. Apartment occupancies are soaring in these areas. Development
in other regions remains difficult because of costs and land scarcity.
Canadian Markets to Watch
The report comments on how Canadians like to live and work in central
cities, as long as they can afford it. If housing is too pricey in 24-hour
neighbourhoods, people move to inner-ring suburbs or beyond and commute back
into the cores. Investors, especially the institutions, are concentrated in
downtown areas too. Planners and developers focus on infill and more vertical
projects, which reinforce the urban cores. The hot-growth energy cities out
west - Calgary and Edmonton - score the highest ratings for investment
prospects, development, and for-sale housing, although it is not certain
whether the recent announcements on royalties will have any effect on this.
Toronto, Canada's premier global pathway city, and Vancouver also have high
ratings. Ottawa and Montreal follow, with Halifax lagging.
Calgary is the Canada's "resource" capital and North America's number-one
boomtown. Survey respondents foresee strong buys for all sectors: 53.5% give a
buy recommendation for Hotel Property, 52.8% for Industrial/Distribution,
48.1% for Retail and Apartment Residential and 44.6% for Office Property.
Furthermore, on average the majority of respondents see Calgary For-Sale
Homebuilding prospects as very good. Edmonton is closely mimicking the
Calgary-style growth wave and as long as demand for energy resources stays
strong, this market will continue to do well.
Vancouver's diversified economy is roaring, the mining industry is
booming and the city provides a large port and a high-tech center. Outrageous
real estate prices frustrate homebuyers and commercial investors and the
market is extremely hard to crack. The 2010 Winter Olympic Games is also a
growth driver and accordingly 44.7% of respondents give Vancouver a buy
recommendation for Hotel Property. A further 43.5% give a buy Retail, 41.3%
for Industrial/Distribution and 36.7% for Office Property followed by 34.1%
for Apartment Residential property. Vancouver also ranks in the good to very
good mark for for-sale homebuilding prospects.
Toronto ranks as a major global pathway destination, 24-hour city, and
manufacturing hub. Compared with other national financial centers, the city is
relatively inexpensive. However, the rising loonie is hurting manufacturing
industries, and clouds over the US economy threaten to stall out momentum.
Three new office towers are under construction, adding 3 million new square
feet of office space. Notably, Office (49.1%), Industrial (46.2%) and
Apartments (40.8%) are given solid buys.
Montreal continues to face concerns about market stability and overall
growth prospects as major companies no longer choose it as a place to set up
shop. But, plenty of government offices fill space. Of the larger cities in
Canada, Montreal ranks lowest as a "buy" recommendation in all real estate
sectors. However, respondents generally rated all Montreal real estate sectors
higher as a "hold" recommendation.
The report notes that best bets for investors for the coming years
include a focus on all property sectors in the high-growth western energy
markets, hold on central business district office space, develop infill condos
near subways stops in Toronto, buy infill sites wherever you can and invest
overseas. Potter concludes, "Domestic opportunities are too limited at current
A copy of Emerging Trends in Real Estate(R) 2008 is available at
www.uli.org or www.pwc.com/imre.
PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance,
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About the Urban Land Institute
The Urban Land Institute (www.uli.org) is a nonprofit education and
research institute supported by its members. Its mission is to provide
leadership in the responsible use of land and in sustaining and creating
thriving communities worldwide. Established in 1936, the Institute has more
than 38,000 members representing all aspects of land use and development
The Urban Land Institute is an active and growing organization in Canada.
With nearly 700 members across the country, Canada's first ULI District
Council was established in Toronto in 2005 and a second District Council is
now being formed in British Columbia. The Toronto District Council will be
hosting a special event on Emerging Trends in Real Estate on November 20th,
2007, featuring Jonathan Miller, the principal author of the report, Blake
Hutcheson, President of CB Richard Ellis Canada Ltd., and George Carras,
President of RealNet Canada Inc. For more information on this event, please
call the Toronto District Council Coordinator at (647) 258-0017, or look on
the web at www.uli.org/events/index.cfm?id=3066.
For further information:
For further information: Carolyn Forest, PricewaterhouseCoopers LLP,
(416) 814-5730, firstname.lastname@example.org