Confidence sinks to 2009 levels, Fundamentals still seen as strong

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 of capital.

"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 > 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

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

Image with caption: "Real Property Association of Canada (CNW Group/Real Property Association of Canada)". Image available at:

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).

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