PwC and ULI's Emerging Trends forecast tackles the uncertainty in Canada's real estate market
TORONTO, Nov. 1, 2011 /CNW/ - For 2012, the Canadian real estate market recovery could taper off, only sustained by modest and "not
stellar" income growth according to PwC and the Urban Land Institute's new forecast Emerging Trends in Real Estate 2012 released today in Canada.
Lori-Ann Beausoleil, PwC Canada's Real Estate Leader says, "Canadian consumers who have
been on a spending and home-buying spree, encouraged by low interest
rates, could see their self-assurance ebb and job growth has
decelerated in response to all the noise about European and U.S. debt
woes. Sensing a general slowdown, respondents to our survey are taking
a 'better-to-be-cautious' investment approach for 2012."
In its 33rd year, Emerging Trends in Real Estate 2012 reflects the views of over 950 of the real estate industry's experts,
including investors, developers, lenders, brokers and consultants in
Canada, the U.S. and Latin America.
While the report calls for flat to slight growth in 2012, many of the
Canadian interviewees believe "we're more immune from shocks and less
tied to the U.S. hip than ever before."
Canadian respondents are concerned about overall jobs growth in 2012 and
point to trends similar to those that constrict employment gains in the
States. The employment scene looks "extremely flat without any apparent
kick start," and "the fizz could easily go out of the market."
Occupancies of 90% and higher persist across most commercial markets
from coast to coast. But when it comes to investment, sidelined capital
finds slim pickings; partnering with local developers may be the only
way for frustrated investors to break into closed office markets in
Now, a big problem for the banks and large public pension funds is where
to invest capital in the face of limited domestic opportunities. "Some
of the financial community's biggest investment wins will come from
outside of Canada in less-regulated markets, including notably the
United States," says Beausoleil.
The report notes that Canada continues to attract an influx of
immigrants who will fuel growth in burgeoning 24-hour cities like
Toronto and Vancouver and help sustain "an edge for the economy".
However, concerns are increasing about all of the high-rise residential
projects springing up in major cities, particularly in Toronto and
Montreal. Buyers in Vancouver and Toronto skew towards Asian investors
and speculators who rent most of the units.
But many interviewees contend the condo action can continue, supported
by urbanization, "move back to the city trends" and large numbers of
immigrant renters. Miniscule residential vacancy rates are evidence to
support these views.
The 2012 Emerging Trends report calls out its "Best Bets" for investors, developers and property sectors:
Hold those Trophies. Husband cash flows, astutely manage properties to control costs and
retain tenants and consider retrofitting with energy-saving
technologies to ensure future competitiveness.
Buy or Hold Infill Land. Intensification policies will continue to propel land values in the
gateway cities: available sites look like gold. Prices that may appear
"crazy" today could seem like bargains tomorrow. Move-back-in-trends
work against outer suburbs and disconnected suburban areas.
Don't Take Chances. There is limited opportunity to score big investment gains and the
economy enters a slower growth mode. To be more opportunistic,
investors could partner with hands-on operators to take under-used
class B-/C apartment buildings and improve NOIs.
Turn More Wary. The big-city condo surge looks unstoppable but maybe it's time to turn
a bit more cautious. The investor wave could give out, and pricing may
need to take a breather.
Be Selective. Outside of condos, other sectors offer few opportunities beyond a choice
office building in larger cities like Vancouver and Montreal. Mixed-use
buildings get a boost across all major markets as retail developers
work on infill projects in tandem with condo construction. New
apartments make sense in markets where condo construction is muted. Hotels go nowhere.
Buy or Hold:
Apartments. Continuing immigration will fire steady demand.
Class A Offices. These are irreplaceable assets in the downtown cores.
Fortress Malls and Grocery Anchored Retail. In prime suburban districts with barriers to entry, these properties
will continue to excel.
Industrial Properties in Toronto. Development opportunities exist for converting well-located low-ceiling
warehouses into big-box formats.
Hotels. It's no time to sell.
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About Emerging Trends in Real Estate
Emerging Trends in Real Estate is a trends and forecast publication now in its 33rd edition, undertaken jointly by PwC and the Urban Land Institute and
reflects the views of over 950 individuals providing an outlook on real
estate investment, development, finance, capital markets, property
sectors, metropolitan areas and other real estate issues throughout
Canada, the United States and Latin America. For more information and a
copy of PwC's Emerging Trends in Real Estate 2012, please visit www.pwc.com/ca/emergingtrends. A copy of the report is also available from the media contacts.
The firms of the PwC network provide industry-focused assurance, tax and
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limited liability partnership, and its related entities have more than
5,700 partners and staff in offices across the country. See www.pwc.com/ca for more information.
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2010. "PwC" is written in text with a capital "P" and capital "C." Only
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About the Urban Land Institute
The Urban Land Institute (www.uli.org) is a non-profit 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 40,000 members
representing all aspects of land use and development disciplines. The
Urban Land Institute is an active and growing organization in Canada.
With nearly 900 members across the country, Canada's first ULI District
Council was established in Toronto in 2005 and a second District
Council exists in British Columbia. ULI Toronto has over 500 members in
"PwC" refers to PricewaterhouseCoopers LLP, an Ontario limited liability
partnership, which is a member firm of PricewaterhouseCoopers
International Limited, each member firm of which is a separate legal
For further information:
Tel.: 416 947 8983
Alexandra Rybak, Urban Land Institute (ULI)
Tel: 647 258 0017