BC commercial activity remained stable in the third quarter

Provincial economic conditions in British Columbia continued to slow in the third quarter of 2019 with weakness in some sectors.

But the overall picture for commercial real estate was stable despite a slight drop in the Commercial Leading Indicator (CLI) from the British Columbia Real Estate Association.

The index slipped to 135.3, the same level it was at in the third quarter of 2018.

Retail and manufacturing stats declined in the third quarter, with lower sales for petroleum and coal, and lower retail sales at gasoline stations and auto dealers. But there were gains for wholesale trade, especially machinery and equipment. However, the overall economic element of the CLI remained negative for the fifth consecutive quarter.

The employment element was positive as office employment gained for a fifth straight quarter – to an all-time high – while manufacturing employment weakened. Employment growth in key commercial real estate sectors such as finance, insurance, real estate and leasing continues to be strong, up by 7,600 jobs in the third quarter. Manufacturing lost 4,200 jobs.

The financial element of the CLI was also positive, for the third straight quarter, due to an increase in benchmark Canadian REIT prices, which more than offset the expansion of short term credit spreads.

The overall CLI has been relatively stable across the past five quarters.

 

by Steve Randall  |  05 Dec 2019

CBRE: Lenders are feeling optimistic ahead of 2020

A survey of lenders has revealed strong sentiment for commercial real estate lending as the new year approaches.

CBRE’s Canadian Real Estate Lenders’ Report found that most respondents plan to maintain or increase allocations to real estate lending in 2020.

The past three years has seen near-record investment in Canadian CRE and this is boosting confidence among lenders. The survey included both Canadian and international lenders.

Gateway markets are particularly attractive for lenders with most keen to support transactions in markets such as Toronto, Ottawa, Vancouver, and Montreal.

Ottawa gained favour to be the second most-desirable market behind Toronto but Hamilton saw the largest gain, rising 4 points to ninth place. There is also strong interest in London, ON, and Quebec City.

While Alberta’s CRE market has been exposed to the energy sector’s woes, lenders are still interested in lending in Calgary or Edmonton. However, lender activity remains deal-dependent or relationship-specific.

“For lenders looking for stable returns on investment, Canadian real estate stands out amid global uncertainty and persistently low bond yields,” said Carmin Di Fiore, Executive Vice President, Debt & Structured Finance, CBRE Canada. “Lenders remain confident about commercial real estate and are looking to deploy capital into the sector. However, lenders are also cognizant of global risks and some will be slightly more selective with their capital in 2020.”

Recession risk?
Most lenders are not predicting a recession in 2020. But bond yields and yield curve inversion will be closely monitored.

Those lenders directing additional capital to the real estate sector will direct 10-20% net new capital next year. For the few lenders looking to decrease their real estate exposures, it is mostly isolated to retail or land asset classes, where 26.1% and 15.2% of respondents respectively signaled an intention to decrease exposure.

Retail continues to trigger caution among lenders with four of the top 5 asset classes that cause concern for lenders occupied by select retail formats: regional secondary markets, power centres, value-add and entertainment and food services. The exception to this is grocery-anchored properties, in which lenders remain confident.

 

by Steve Randall  |  05 Dec 2019

Canadian commercial investment should begin looking further

Would-be investors in Canadian commercial real estate should begin considering markets beyond the usual hotspots of Toronto, Montreal, and Vancouver if recent trends south of the border are any indication.

The tech industry’s sustained hunger for Canadian offices is gradually depleting available urban office space. The examples set by some U.S. cities might provide a good answer to this quandary, according to the Computing Technology Industry Association (CompTIA).

“Something like a Charlotte, or a Kansas City, or an Austin,” CompTIA senior vice-president of research and market intelligence Tim Herbert told Postmedia in an interview.

“These cities [are] more affordable, [and] in some cases you can make an argument that there is a better quality of life.”

In its Cyberprovinces 2019 study, CompTIA noted that smaller cities can become more feasible investment options in the very near future. Last year alone, Canadian tech employment expanded by 61,000 new jobs, amounting to a 3.8% annual increase.

Overall, the tech workforce grew by as much as 249,000 new employees since 2010.

Herbert added that demand for Canada’s office spaces is “not just limited to technology companies, who are starting to take office space or build new headquarters, but a range of different company types are attracting tech talent.”

Data from Avison Young showed that the Canadian office market has seen the positive absorption of 9 million square feet (MSF) in the year ending June 30, 2019. This has massively outstripped the nearly 6 MSF absorption during the immediately preceding 12-month period.

The sustained popularity of the industry and the resulting demand upon Canada’s commercial real estate is impelled by the strength of its long-term employment prospects. In 2018, tech earnings clocked in an average of $78,070 – fully 51% higher than the average reading of $51,794 in the private sector.

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by Ephraim Vecina | 24 Oct 2019

The Difference Deciation and Passion makes. VOTED BEST IN THE INDUSTRY

Why CRE investors should consider niche assets

Investors in commercial real estate should consider more than the mainstream asset classes and go niche.

That’s the takeaway from a new report from global real estate firm Cushman & Wakefield that highlights the benefits of investing in niche assets.

These assets include cold storage, data centers, medical offices, student housing, and senior housing.

The report says that transactions in niche assets have exploded in recent years and are now similar to retail and industrial. And changes in how we live and the aging population is set to drive volumes higher.

Niche assets have also outperformed the overall CRE benchmark in the two most recent recessions, suggesting that this could provide defensive exposure in future downturns.

Investors also gain exposure to secular drivers such as changes in demographics, affordable housing challenges, technology, and consumer behavior.

Complex operations
The report notes that institutional activity in niche assets could have room to expand from its current uneven pattern, which would “support pricing and liquidity in a virtuous cycle.”

However, it’s suggested that investors might be better buying an experienced operator in a niche or partnering with one, as niche asset strategies are “often operationally complex.”

By Steve Randall | last updated on the 22 Oct 2019

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Toronto needs to double rental supply to meet future demand

A new report from RBC Economics focuses on the rental housing deficit which is set to intensify in the coming years, especially in Toronto and Vancouver.

The report says that supply of new rental homes will need to pick up pace to meet future demand; in Toronto the pace must double. In the meantime, lack of supply is leading to “uncomfortable highs” for rents – which means those hoping to save up to buy a home are squeezed even further while high home prices have “crushed some homeownership dreams.”

RBC says that big cities must increase rental supply to have any hope of tackling affordability issues.

It notes that there are some positive signs in some cities, such as Montreal and Vancouver where has new waves of supply underway; and in Calgary where there are elevated rental vacancies.

But in Toronto, the report says supply will not come close to demand in the coming years and calls for specific targets and incentives to address the issue.

Deficit needs action
RBC Economics’ estimates of the supply needed to balance out supply and demand in the major markets as of late 2018 are: a deficit of 9,100 rental units in Toronto, Montreal had a 6,800-unit deficit and Vancouver 3,800 units.  Calgary carried a small surplus of 300 units.

This will be exacerbated by the estimated increase in renter-households of 22,000 in Toronto and 9,400 in Vancouver over the medium term, with Montreal averaging 8,200 per year on average.

The report estimates that Toronto will need 28,600 new rental units on average over a two year timeframe with 11,600 in Montreal, 11,300 in Vancouver and 4,150 in Calgary.

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage.

By Steve Randall |  last updated on the 26 Sep 2019

 

Seven-building acquisition attests to Montreal’s rental strength

Late last week, Greybrook Realty Partners and Marlin Spring announced the acquisition of a Montreal portfolio comprised of seven apartment buildings with a total of 324 rental units.

Said properties are situated close to restaurants, shops, hospitals, grocery stores, two metro stations, the Université de Montréal, and hospitals like the Jewish General Hospital.

Greybrook Realty and Marlin Spring stated that they will also be in charge of renovating suites and improving the common areas across all the buildings.

“The close of this acquisition brings the total number of units within our value-add portfolio to 774. With asking rents currently below comparable products in the area, we believe an opportunity exists to improve both the product offering and revenue through execution of a value-add program,” Greybrook Realty executive director Jared Berlin said.

“With the success of our existing Montreal portfolio, supported by the City of Montreal’s strong rental market fundamentals, we believe these assets are a natural fit in our growing Quebec Multi-family Portfolio” Marlin Spring CFO Elliot Kazarnovsky added.

In recent years, strong population growth – especially immigration – has spurred sustained growth in Montreal’s rental housing market.

Figures from IPA’s Midyear Canadian Multifamily Investment Forecast Report indicated that by the end of June 2019, the city’s average rent increased 4.1% year-over-year, up to $797 per month. Average prices grew by 6% year-over-year, up to $154,400 per unit.

 

by Ephraim Vecina | 23 Sep 2019

Frenzied commercial development marks next phase for emergent metropolis

Montreal’s residential real estate market has grabbed all the headlines in recent years, but the city’s commercial sector is beginning to burgeon and it, too, will get its due.

Toronto-based Michel Durand, President and CEO of Multi-PretsMortgage Alliance Commercial, says that Toronto and Vancouver cast a pall on Montreal, but as those cities have begun topping out, the Quebecois metropolis is attracting international attention.

“The Montreal market is finally seeing its share of the Asian influence, which we saw in Vancouver about 10 years ago and then it moved to Toronto when things got overcrowded and overpriced. Now we’re seeing a lot of development money moving into Montreal, which we’ve witnessed over the last three years and which, I think, is a trend that’s going to stick for at least the next five years,” said Durand.

Of course, in Montreal, it began with an explosion of interest in residential, and with its success has come the next, if more lucrative, phase of the city’s real estate development.

“Residential is a catalyst for commercial development,” continued Durand. “Once investors and developers get a  taste of how easy it is on the residential side—we’ve seen a lot of condos and towers go up from Asian investors—which is where they start, then they go into commercial development, like office buildings and new retail plazas, by partnering with local players.”

Likely contributing to Asian interest in Montreal is the city finally has direct flights to Mainland China, added Durand.

“Flights would go China-Vancouver and China-Toronto, and that’s where the money stayed,” he said, “but a few years ago flights started going to Montreal directly and we immediately saw the effects on the commercial real estate side, which also includes residential—transactions that are completely investments.”

In tandem with an institutional partner, Kevric Real Estate Corporation recently announced its purchase of a major downtown Montreal office tower located at 600 de la Gauchetière West, for which it has big plans. The purchase is also the latest sign that downtown Montreal’s commercial real estate sector is getting a boost the likes of which it hasn’t seen since a bygone epoch in the city’s history when, as Canada’s largest city, it was the country’s economic engine.

In addition to updating 600 de la Gauchetière W.’s architecture and building a new lobby facing Square Victoria, it will try to attract companies from Montreal’s up-and-coming industries, including technology, knowledge, and media.

“This important acquisition allows Kevric to expand its offering of commercial real estate spaces for organizations which aim to distinguish themselves and will ensure the company’s growth in Montreal for years ahead,” said Richard Hylands, Kevric’s president. “Kevric is proud to continue fueling the evolution of downtown Montreal into a world-class Canadian city.”

Published on MortgageBrokerNews.ca

by Neil Sharma
31 July 2019