Commercial property leader survey reveals deepening concern about
economic growth and the specter of higher interest rates
TORONTO, Nov. 13, 2013 /CNW/ - Though fundamentals are still seen as
strong, confidence among Canada's commercial real estate leaders sunk
to the lowest level since 2009, dragged down by persistent concerns
about the economy's outlook and a potential slowdown. These and other
findings were revealed in the Fourth Quarter 2013 Canadian Real Estate
Sentiment Survey released today by the Real Property Association of
Canada (REALpac) and FPL Advisory Group. The quarterly survey measures
the current and future outlook of Canada's top commercial real estate
executives on overall real estate conditions, values, and availability
"With so many unknowns in the picture right now, including the
slower-than-expected recovery in the U.S., it's no surprise that
there's a mixed bag of sentiments among property leaders right now,"
explained Carolyn Lane, Vice President, at REALpac. "All eyes are on
economic growth and the direction of interest rates, but at the same
time investor demand remains strong and sources of equity capital are
plentiful, except where REITs are concerned."
Added Lane, "We may see some short-term bumps, but there seems to be a
general consensus that the long-term outlook is positive."
Top-line Sentiment Survey findings included:
Many market participants see higher interest rates, decreased
transactional activity, and cap rate decompression on the horizon;
others see reason for longer-term optimism
Without meaningful improvements in the economy, currently high asset
values are expected to ease up over the coming year
Debt is still readily available for most assets, though some expect
pricing to become more expensive in the near term
Equity capital from private sources remains plentiful; REITs, however,
continue to be impeded by current market conditions as their pricing
power has weakened
Survey respondent Ronald Findley, Regional Director, The Great West Life
Assurance Company, expects bond yields to continue rising slowly over
the next year or so, ending cap rate compression and causing "small
increases" in the long haul. "I don't think the economy can support
dramatic increases in rental income, so as cap rates rise, values will
see some easing," he said.
François Goudreau, Senior Portfolio Manager, Caisse de retraite
d'Hydro-Québec, added, "Going forward, we may see cap rates increase
with interest rate movements. Real estate values could stay the same if
NOI increases in tandem with interest rates."
Underscoring the range of views amid market conditions that are hard to
predict, Dr. Kevin Miyauchi, President, MIYA Consulting Inc., expressed
optimism: "The market remains strong across most sectors of real
estate. This last quarter we had expected to see a softening in the
residential and office marketplaces, but they still remain surprisingly
high. Each quarter I expect to see a leveling off, or a mild
correction, but it has yet to materialize in the numbers."
Concerns about Canada's economy are widespread. Recently, the Royal Bank
of Canada joined a chorus of forecasters who see the economy growing at
a slower-than-expected pace through 2013 and 2014. The bank cut its
forecast to 1.8% this year, down from 1.9%. Next year, RBC expects
growth to reach 2.8%, and finally pick up steam in the first half of
2015, driven primarily by increased exports.
For more information and to download a copy of the Canadian Real Estate
Sentiment Survey, visit www.realpac.ca > Publications > Canadian Real Estate Sentiment Survey.
About the Real Property Association of Canada
REALpac is an exclusive, executive organization whose vision is to be
Canada's most influential voice in the real property investment
industry. Our mission is to bring together Canada's real property
investment leaders to collectively influence public policy, to educate
government and the public, to ensure stable and beneficial real estate
property and capital markets and to promote the performance of the real
property sector in Canada.
REALpac Members currently own in excess of $200 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.
Overall, the industry's contribution to the Canadian economy and job
creation is considerable. In 2011 alone, the Canadian commercial real
estate industry generated $63.3 billion in economic activity, according
to a groundbreaking study released by REALpac and the NAIOP Research
Foundation. The Canadian commercial real estate industry supports
340,000 jobs, generates $18.1 in personal income, contributes $7.2
billion in personal and corporate income tax revenues for the federal
and provincial governments and accounts for $32.4 billion in total net
contribution to Canada's GDP.
For more information, please visit 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.
Image with caption: "Real Property Association of Canada (CNW Group/Real Property Association of Canada)". Image available at: http://photos.newswire.ca/images/download/20131113_C6687_PHOTO_EN_33284.jpg
SOURCE: Real Property Association of Canada
For further information:
Please contact: Julia St. Michael, Manager, Research & Environmental Programs, REALpac, 416-642-2700 x 237 or Erin Green, Senior Associate, FPL Associates L.P., 888-368-6598 (toll free).