TORONTO, Feb. 24, 2012 /CNW/ - The Real Property Association of Canada
(REALpac) and FPL Advisory Group are pleased to announce the results of
the First Quarter 2012 REALpac / FPL Canadian Real Estate Sentiment
The first quarter of 2012 helped to reinforce many of last quarter's
views on the strength of the Canadian commercial real estate sector.
The overall real estate sentiment index came in at 61, slightly up from
60 last quarter but down from 71 a year ago. While respondents have
reported improvement in market conditions, many expect the rate of
improvement to decline over the coming year. However, it is important
to note that the Sentiment Index measures the market trajectory and is
scored from 0-100, meaning scores above 50 reflect positive trends and
score below 50 reflect negative trends. This quarter is the tenth
straight quarter in which the Index has been above 50, reflecting a
consistently positive trajectory of the market.
The Current Index came in this quarter at 64, the same as last quarter.
The Future Index is now 58, and while this has not seen a material
change from last quarter, it has dropped from 71 a year ago. Many
executives have maintained this is a direct result of the vast
improvement seen over the past couple years. There is now less room for
continued progression, leading to a more modest outlook for 2012. As
one respondent voiced, it appears the Canadian market has reached a
Canadian interviewees echoed these beliefs, affirming the current
positive market conditions while displaying cautious optimism for 2012.
One respondent was pleased with activity levels over the past year,
stating, "Last year was our busiest year in terms of acquisitions, and
that's saying something." Another leader showed further positivity,
saying, "Demand is now fairly consistent, and capitalization rates are
steady." Looking ahead, one interviewee said, "Within this low interest
rate environment, I cannot see too much change. I expect lots of
When comparing Canada's Sentiment Index to that of the United States, a
meaningful split has appeared, driven primarily by the Future indices.
The Overall U.S. Sentiment Index came in this quarter at 68 (up from 59
last quarter but relatively flat from 69 in Q3 2011). The U.S. Future
Index is now 70, in comparison to Canada's 58. This reflects a widely
held belief that the U.S. still has plenty of room for improvement as
they continue to emerge from prior economic woes and hope to see more
certainty from the European Union.
Canadian real estate asset values have continued their incline,
confirmed by a large majority of respondents (87%) who reported
increased asset values throughout the last year. All the while, over
50% of survey participants expect level pricing looking ahead to 2012.
While a noteworthy group (30%) expects a modest increase in values
going forward, only 2% of respondents expect aggressive growth. Much of
the recent price increases are due to continued capitalization rate
compression. One market leader noted, "I never cease to be surprised by
some of the (low) cap rates I am seeing out in the market."
Over the past year, debt capital has become increasingly available. More
than half of the survey participants reported increases in debt
availability, while only 7% of our respondents reported a slight
decline. Keep in mind that these reflections of 2011 come even after a
very positive 2010, where a large improvement in the capital markets
was seen as well. Due to the large progress Canada's debt markets have
undertaken, 67% of respondents maintain a neutral stance on debt
availability going forward. Reflecting the positivity of many, one real
estate leader stated, "Accessing (debt) capital is not much of an
issue. Anything that is generating income will be able to get capital
going forward. I do not expect this to change."
The equity market continues to remain even stronger, and with a slight
increase from last quarter, nearly 60% of respondents reported
increased in equity available over the trailing year. One professional
affirmed, "There is a good balance right now. [Equity] capital is
available for good products. Nobody is chasing assets irresponsibly,
and the availability should stay its course." Similar to the debt
markets, a majority (58%) expect equity availability to remain about
the same in 2012. While very few expect any declines in capital
availability, it is the availability of product, rather than capital,
which may be the cause of stagnation going forward.
As Canada's most comprehensive measure of senior executives' confidence
in the Canadian commercial real estate industry, the Q1 2012 survey
captured the thoughts of 55 leading real estate executives, including
CEOs, Presidents, Board Members, and other senior executives from a
broad set of real estate sectors including owners and asset managers,
financial services providers, and building operators and related
service providers. Survey respondents represent income producing real
estate; including office buildings, retail shopping centers, industrial
buildings, hotels, multi-family residential (apartment buildings), and
seniors' residences. This quarterly economic survey serves as a gauge
of senior real estate executives' confidence in financial and real
estate markets in Canada. The REALpac/FPL Canadian Real Estate
Sentiment Survey measures executives' current and future outlook in
three areas; including overall real estate conditions, real estate
asset values, and availability of capital. Three Sentiment Indices
comprise the survey; including a Current Conditions, Future Conditions
and Overall Conditions Index. The "REALpac/FPL Canadian Real Estate
Sentiment Survey" is directly comparable to the "Real Estate Roundtable
Sentiment Survey" in the U.S. (also conducted by FPL Advisory Group,
using an identical methodology).
To download a copy of the report, go to 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 centers across Canada. Members
include real estate investment trusts (REITs), 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
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:
Julia St. Michael, Manager, Research & Environmental Programs, 416-642-2700 x.237, or Jonas Bordo, Senior Director, Vice President, FPL Advisory Group, 888-368-6598 (toll free).