Edmonton office market remains resilient

Edmonton's office market continues to show strength and stability, says an Avison Young report.
Office vacancy in the Alberta capital has risen to 8.2% compared to 5.8% at the end of 2008, says the firms Fourth Quarter 2009 Office Summary.
As a result of the recession, many companies changed their office space utilization in a bid to become more efficient, but the market is still considered healthy entering 2010. Vacancy in many other Canadian markets will reach double figures, if it hasn't already.
These are some of the key trends noted in Avison Young’s Fourth Quarter 2009 Edmonton Office Summary, released today.
“Despite a higher vacancy rate, the Edmonton office market is still considered to be in reasonably good health,” Avison Young principal Cory Wosnack in a news release. “The past six months have seen a continued rise in the amount of available space, mostly due to the injection of numerous sublease opportunities, and we expect this trend to continue until mid-year 2010. With these new opportunities comes a more competitive marketplace amongst landlords; as a result, tenants will benefit from more creative financial incentives to lease space. This situation will cause modest downward pressure on rental rates and higher inducement packages for tenants by way of free rent and improvement allowances."
A vacancy rate of approximately 8% is considered to represent a balanced market. Downtown Edmonton overall office vacancy, which includes head lease and sublease space, increased to 6.9% from 5.2% a year ago. Absorption was negative-184,485 square feet (sf), up from 37,097 sf at this time in 2008.
Suburban office vacancy rose to 10.7% from 7.1% in the fourth quarter of 2008. Absorption was negative-21,895 sf, compared to positive absorption of 267,734 sf at the end of 2008.

Bennett Jones anticipates CRE recovery

Law firm Bennett Jones predicts commercial real estate activity will pick up in 2010.
Toronto-based Bennett Jones, where former Bank of Canada head David Dodge, is now a senior adviser, issued comments on commercial real estate as part of a wide-ranging forecast on trends that will influence Canadian business in 2010.
"With renewed access to the public markets and improved borrowing costs, watch for an increase in activity levels by Canadian real estate entities both within Canada and internationally (particularly in emerging markets)," states the report. "Pension funds and other institutional investors will continue to seek the safe return of stable income-producing commercial real estate assets."
The outlook coincides with Dodge's prediction that Canadian economic growth will rebound to about 3.5% and the dollar will rise modestly on the strength of firming commodity prices, with the exception of natural gas, and a softening U.S. greenback. Dodge has warned that the U.S. commercial real estate market still faces a correction, he does not anticipate Dubai's economic woes to pose serious problems when it comes to raising capital for property investments.
Meanwhile, the Bennett Jones report predicts a greater proportion of restructurings and fewer outright liquidations as bank credit begins to loosen. It also anticipates more Alberta oilsands projects will get back on track, little in the way of tough new Canadian climate-change regulations while Washinton remains in "political gridlock" and more public-private-partnerships on infrastructure projects.
All of these factors will likely have at least an indirect effect on commercial real estate.

Investors showing more confidence as 2009 ends

Signs continue to point to a significant rebound in Canada's commercial real estate market in 2010.
While bloggers and tweeters in the U.S. are fretting about an impending market crash, the Canadian market is quietly moving into position for a turnaround. As 2009 comes to an end, institutional investors, especially REITs, continue to shore up their balance sheets and scout properties to purchase.
In many cases these days, the decision not to buy is based on a lack of supply, especially in in downtown Vancouver, where a new office tower is not expected to be built before 2013. Avison Young brokers predict that many investors will come off the sidelines next year as the effects of the global financial meltdown ease and they gain more clarity on their own business operations.
The general feeling, notably in Toronto and other Eastern Canadian markets, is that the worst of the recession is over. Investors will show considerably more confidence in 2010, especially if employment, considered a key commercial real estate benchmark, continues to rise.
A number of large transactions, ranging in price from $25 to $212 million are already in the works. They include Dundee REIT's announced acquisition of the 655,000-square-foot Adelaide Place office complex in Toronto for $211.5 million, which is slated to close in February.
Other pending deals range from office buildings in Vancouver, Toronto and Ottawa to large retail properties in Calgary and apartment buildings in Montreal.
The next 12 months should not break many records, especially when you consider the well documented glut of office vacancy in Calgary. But 2010 is expected to put commercial real estate investors in a better mood than they were this year.

(Follow Monte Stewart on Twitter at www.twitter.com/MonteStewart.)

Hutcheson to head Oxford Properties

Oxford Properties Group has appointed Blake Hutcheson as its new president and CEO.
Starting Feb. 1, he will assume the duties currently held by Michael Latimer, who has been appointed chief investment officer with Oxford's parent, OMERS.
Hutcheson was head of global real estate with Mount Kellett Capital Management, a New York-based private equity firm with offices in around the globe. Previously, he spent 14 years with CB Richard Ellis in Toronto, most recently as president of the Canadian, Latin American and Mexican operations.
Hutcheson holds an undergraduate political science degree from the University of Western Ontario, along with a masters in real estate development from Columbia University and a graduate diploma international relations and comparative politics from the London School of Economics.
Named one of Canada's Top 40 under 40 in 2000, he has sat on many boards and committees, and chaired Toronto Mayor David Miller's Fiscal Review Panel in 2008 and is currently the vice chair of Build Toronto.
He will report to Latimer.

Industrial land base shrinking on Vancouver's North Shore

A shrinking industrial land base on the North Shore has helped keep that sector of the commercial real estate market more stable during turbulent times, Avison Young broker Matt Thomas told the Vancouver Sun in an article published Wednesday.
Thomas said the scarcity of industrial property should keep such lots at high prices while values recover in other areas of Metro Vancouver. North Shore industrial properties average $2 million per acre compared to $4 million in Vancouver proper.
But values in other Metro Vancouver industrial submarkets have plummeted. Avison Young reported in November that industrial land values had decreased 20 to 30 per cent in other areas of Metro Vancouver and the Fraser Valley.
Thomas, Avison Young's North Shore specialist, said North Shore industrial land values "have been more stable simply because there's a lack of it and: "People will always pay top dollar for land that's in the right location."
The findings were in an Avison Young report on the North Shore commercial real estate market released Wednesday.

To see the report, click on the link below.

http://www.avisonyoung.com/library/pdf/Media_Releases/AY_North_Shore_BC_Market_Press_Release_Dec_1_09_FINAL_1.pdf

Follow Monte Stewart on Twitter at: www.twitter.com/MonteStewart

RioCan continues to buy retail properties

Canada's largest REIT continues to make sizable retail acquisitions.
Toronto-based RioCan REIT announced Tuesday it has agreed to purchase a stake in four retail shopping centres in British Columbia and Alberta for $166 million. Under the deals expected to close at the end of the year, RioCan will purchase malls in Surrey, B.C., and Edmonton in joint ventures with CPP Investment Board and Sun Life, respectively.
RioCan will co-own Grandview Corners shopping Centre in Surrey and and the Edmonton West Retail Centre. The trust will hold 100% interests in retail centres in Lethbridge and Calgary.
“These four centres represent an excellent addition to RioCan's core portfolio and provide an opportunity to acquire a number of strategic assets while expanding our important relationships with CPPIB and Sun Life,” said Edward Sonshine, RioCan's president and CEO, in a news release.
With credit markets loosening, RioCan has arranged a five-year conventional first mortgage financing of $113 million whereby it will cover $94.5 million at a rate expected to be in the 5% range.
Last month, RioCan announced that it will spend $170 million on eight Canadian retail properties. The properties range from Ottawa to Winnipeg to Fort McMurray and offer a healthy 7.9 per cent cap rate.The move came after RioCan agreed to purchase seven grocery-anchored properties in the Northeastern U.S. as part a joint venture with U.S.-based Cedar Shopping Centers Inc. for $141 million.

Real estate marketers embrace social networking

Traditional real estate marketing methods aren't working anymore, and
David it's time for the industry to embrace social networking, an Urban Devlopment Institute Pacific branch's heard Tuesday morning.
David Allison, principal of real estate development marketing firm Braun Allison, said developers can no longer market projects on spec, and offerings must "brand with the truth."
He was part of a panel discussion that examined how social networks are changing real estate marketing efforts.
Allison, author of the book Sell the Truth: A Marketing Campaign Guide for Real Estate Developers in the New Economy, said five key trends have emerged with the growth of online advertising.
People want more information about everything so that they can use it as "an antidote to fear." Consumers also expect dialogue with sellers, buyers are searching for authenticity, traditional advertising is less effective and social media usage is increasing.
However, real estate marketing is still about branding. All facets of a project must be based on truth, not just marketing. Real estate companies "can't pull a fast one anymore" and must help buyers win.
Allison has worked in such countries as Costa Rica and Mongolia as well as Canada and the U.S. in an advertising and marketing career that spans about 25 years. He calls for marketers to be more like journalists.
Contending the social media movement is as big as the Industrial Revolution of the late 1800s, he says websites have become the centre of the universe and traditional media support them. Likening social networking to a bar, he calls for real estate marketers to adopt a "blended media" approach to time stories, get the pulse on information campaigns and engage sales teams.
If you can sell the truth, he concluded, you can be the media.
real estate markets can "be the media."
Hanson Lok, senior research manager with polling firm Ipsos-Reid, said 85% of Canadians now have Internet access compared to 70% in 2001. But the Internet is not a real estate marketing silver bullet, and online marketing should be only one part of a blended approach.
Kirk LaPointe, managing editor of the Vancouver Sun, said online efforts have helped his publication's readership stable over the past five years.
"We don't really consider ourselves a newspaper anymore at the Vancouver Sun," said Lapointe, who uses Twitter, Facebook and LinkedIn extensively. "We're a news platform."
LaPointe said a new engagement is emerging as news deadlines effectively disappear. If the Sun works on Web content development every day, the newspaper will take care of itself.
But LaPointe worries about the quality of journalism in the future as journalists become "entrepreneurs" and learn more about search engine optimization while fewer scribes work full-time.
"Everybody's a journalist," said LaPointe, referring to the growth of social media.
He predicted word of mouth will become the most powerful method of sharing news and information in an era that is exciting and profoundly challenging for journalists.
Amie Lake, CEO of Tagga Media Inc., which markets through mobile devices, said cell phones are the future of real estate marketing. Real estate companies must have mobile-compatible websites, because more Canadians use phones than Facebook and Twitter combined.
Contending that mobile devices will ultimately spell highly-qualified leads, she called for companies to devote 10% of their media-buying budget to mobile marketing while using the devices to define their audience and learn and modify what works.
Chris Breikss, president of 6S Marketing, said social networks enable real estate firms to measure return on investment much better than they can through traditional advertising through tools like Hootsuite, Radian6, Twitalyzer, Slide Share and Google URL Builder.
He pointed to Polygon Homes and Opus Hotels as successful cases of real estate firms that have succeeded in maximizing their search engine marketing campaigns. Polygon and Opus have used Facebook and Twitter to build thousands of followers that helped boost their bottom lines.
But, perhaps, the large crowd on hand was the biggest commentary on the social media movement within real estate. When Breikss asked for a show of hands, many indicated that their firms used social networks, but they do not know about some of the technoligies that he mentioned.
Suffice to say they're willing to learn.

RioCan keeps buying as market improves

Here's another sign that the commercial real estate investment dam is about to burst.
RioCan REIT announced this week that it will spend $170 million on eight Canadian retail properties. The properties range from Ottawa to Winnipeg to Fort McMurray and offer a healthy 7.9 per cent cap rate.
The move comes after Toronto-based RioCan agreed to purchase seven grocery-anchored properties in the Northeastern U.S. as part a joint venture with U.S.-based Cedar Shopping Centers Inc. for $141 million. Two of those deals will close by the end of this year and the rest will be finalized in the first quarter of 2010.
RioCan, Canada's largest REIT, also expects to buy six more properties in Western Canada for $335 million by 2010. The properties, which comprise 1.4 million square feet, are under conditional contract and proceeding through various stages of due diligence.
"These acquisitions represent an excellent opportunity to put to work some of the capital raised over the course of this year in a manner that is accretive to our unitholders," said Edward Sonshine, president and CEO of RioCan, in a news release. "These largely grocery and drugstore anchored retail properties represent a continued execution of RioCan's growth strategy in Canada. They are primarily located in well established urban centres with strong national and anchor tenants that will provide a stable source of cash flow as well as the potential to enhance returns through the leasing of currently vacant space."
In other words, RioCan has committed to investing almost $1 billion in recent months.
But RioCan is just one of many REITs that have accumulated cash and cleaned up their balance sheets lately after muddling through the after-shocks of the U.S. financial meltdown and global recession. Some observers might have expected more investment to have occurred by now. but a lot of niggling points kept them at bay.
These RioCan deals offer more strong evidence that the once wide buyer and seller expectation gap is reaching the point where many deals can be done. Meanwhile, credit is more easily attainable, yields are at the point where REITs can justify the investments to their boards, and institutional investors are gaining more confidence in the Canadian commercial real estate market and economy as a whole.
In other words, the dam that has blocked many deals in 2009 is about to break.

Boardwalk REIT boss started from humble roots

Boardwalk REIT boss Sam Kolias shares the secrets of his commercial real estate success in an interview with Gordon Pitts of The Globe and Mail.
Kolias explains how his Calgary-based REIT, now the largest in the country after launching as a small private firm, helps the homeless, self-regulates its rental rates, and makes philanthropy a regular habit.
I met Kolias way back when through his father-in-law. Kolias struck me then as a very decent person. To get the approval of his no-nonsense father-in-law, he would have to be.
It also helps that he can play pool a little bit; however, that's another story.
Click on the link below to read the Globe yarn.

http://tinyurl.com/create.php

Avison Young opens new U.S. Capital-regional office

Avison Young took a major step in its U.S. expansion today, opening its new Capital-region office in Washington, D.C.
The office will serve as the headquarters for many new Avison Young locations in the Metro D.C. region, spanning Maryland and Northern Virginia. It becomes Toronto-based Avison Young’s second U.S. office, along with Chicago.
Keith Lipton, who has more than 20 years of commercial real estate industry experience in the D.C. region, has been recruited as regional managing director.
Lipton,also appointed an Avison Young principal, most recently served as executive vice-president and managing director of Washington, D.C., offices for Grubb & Ellis. He has also held executive posts with CB Richard Ellis, Insignia/ESG, and Jones Lang LaSalle.
Meanwhile, Margaret Donkerbrook joins Avison Young’s new D.C. office as vice-president of U.S. research, and Sarah Peyton has signed on as regional operations manager. Like Lipton, both were formerly with Grubb & Ellis in D.C.
Donkerbrook joined Grubb in 2006 as managing director after holding executive posts with CBRE, Jones Lang Wooton and Jones Lang LaSalle. Peyton has held management posts with Grubb and CBRE since 2003.
Over the past three years, says Avison Young chair and CEO Mark Rose, Lipton, Donkerbrook and Peyton led the turnaround of Grubb & Ellis in the DC Metro region, enabling it to become the firm’s top-performing office in 2008 and so far in 2009. During the turnaround, Lipton and his team recruited 60 per cent of the brokerage professionals and 80 per cent of the total staff in the D.C. Metro region, added multiple service lines and expanded into the Baltimore market.
Lipton, Donkerbrook and Peyton will also play a crucial role recruiting brokers and staff for the new D.C. office and the surrounding region. Rose, a former Grubb & Ellis CEO and Jones Lang LaSalle COO and CFO of the Americas who has not hesitated to recruit former colleagues, says Avison Young is already actively recruiting senior brokers and executives to fill its service needs in the D.C. region.
It’s all part of the company’s plans for further acquisitions in the U.S. and globally.

Segal explains how Fields started

Here's more from Joe Segal's session at the November NAIOP Vancouver breakfast. In this segment, the legendary commercial real estate investor, philanthropist and retailer recalls how the Fields department store chain, a predecessor of Zeller's, started up . . .

4. “I started in the war surplus business, and in that business I sold everything from medical equipment to lighter flints to pounding equipment . . . You name it. It was a great experience.

"I had five bargain-centre stores. I used to buy army trucks. They were four-by-fours or six-by-sixes. Big trucks . . . So what are you going to do with the trucks. These were brand new trucks. They had maybe 400 kilometres on them – 2,000 was a lot. I would buy these things 20 at a time, and I would take the four-by-fours and would put a tack on the map and sell them as firetrucks in every small (community) in the (Greater Vancouver Regional District), on (Vancouver) Island, next door, (across) British Columbia. The six-by-sixes became logging trucks . . . I would get maybe $5,000. They would cost me $400 anyway. I was in the surplus business and I had five bargain-centre stores. At that time, Sears had just opened. You know, I have to tell the story that Sears put me in the retail business. I had a person that walked in the door and said, ‘I’ve just bought a deal from Sears.’ I said, ‘What’s the deal?’ He said, ‘Twenty thousand dresses and skirts. Women’s clothing.’ This was the end of the season catalogue. Sears had a catalogue operation on Smithe (Street) . . . He said, ‘I haven’t got the money to pay for them. I paid $1 a piece for them – 20,000 units.’ I said, ‘Okay, I won’t lend you the money, but I’ll give you a profit . . .’ So I bought 20,000 skirts and dresses and, you name it, women’s clothing . . . I gave him a profit of 10 per cent . . .

"Now, what am I going to do in a war surplus store with ladies’ dresses and ladies’ blouses? So I went down Hastings Street and mid-block between Abbott and Carroll, there was a 15-foot, perfectly empty store, and I rented it. I opened up with these 20,000 units and I had two or three ladies to run it, and that’s how I got into the clothing business. And after that, I started developing a relationship with Sears. In Vancouver, it never snows, and I would buy snowsuits from right across Canada. From Halifax. Toronto. Regina. Operations of the end of the season . . . One thing led to another. In the old days, you didn’t operate by a computer. You operated by the sliding rule. You know what a slide rule is? . . . You determined how many you were going to sell based on the early calls. Your 10-day calls. Your 30-day calls . . . If the trend flattened, you had a lot of surplus inventory. I would buy the surplus inventory. In December or November, or whatever it was, it was getting toward the end of the season. I would buy tons of this stuff and, then in December, when the calls picked up, I would sell it back to them . . .

"That’s how Fields started. At that time, I had all my ads and everything set up to start my first Fields store. If it wasn’t (going to be called) Fields, it was Thrifty. I said to myself: This is Thrifty and it’s going to guide me, because Thrifty is a connotation that’s cheap. It’s price-sensitive, and I don’t know where this business can grow. It may go up quick . . . so I changed the name to Fields, which really meant that it wasn’t a high price. It wasn’t a low price. It was the right price.”

Joe Segal recalls the early years

Time had run out, but nobody was in a hurry to leave.
Legendary retailer, real estate investor and philanthropist Joe Segal was told stories about his life in business during this month's NAIOP Vancouver breakfast, and many wished later that they could have stayed to hear more. (For proof, check out the tweets on Twitter).
It's not a well known fact, but Segal was once a commercial real estate broker.

I'll be blogging Segal's answers to questions in the Q and A session. Since we're in blog mode, I'll keep things in point form.

In this segment, he talks about his early years on business.

1. On starting out with $1,000.

“I had no money. Well, I had $1,000 . . . That was 21/2 years of deficit spending at $1.30 a day. That’s a buck nowadays . . . I always got, incidentally, what no one else wanted. So I had to become aware of what I was going to do with it before I bought it because I couldn’t make any mistakes. The medical supplies package was actually worth . . . a million dollars. I think I paid $7,000 for it, because nobody else knew what to do with it. When you buy these packages of medical equipment, if you have no idea what a cranium drill is . . . how do you sell it? . . . I put an ad in the paper and I said: Attention, hospitals, doctors. Wherever there’s medical equipment. New, a third off, and used 50 per cent off . . . So you had to know what you were going to do with the value . . . War surplus paint. Olive drab paint. I can remember buying 2,000 gallons for 25 cents a gallon . . . I rented a truck. I loaded the truck. I thought: What am I going to do with it. Nobody’s going to paint their house camouflage. Olive drab? So I loaded I loaded this all in a green . . . Ford truck. I’d load it in the morning and I would head for Ladner. The next day, I would load it again and I would go to Chilliwack, it all in it isn’t what it’s worth. It’s what you do with it that really counts. I had every barn in the Lower Mainland painted olive drab. So it isn’t what’s it’s worth. It’s what you do with it that really counts.”

2. On life as a commercial real estate broker.

“I was not kidding. I was a broker, but I couldn’t make a living at it, because I was selling coffee shops, corner grocery stores. In those days, the commission was 10 per cent, and I sold many coffee shops and many grocery stores. The average price was $50,000-$I00,000 and $60,000-$80,000 and I was doing pretty well and I had two partners . . . I would go out and I would (get) the profits, the commissions, and then I would come back and we would have a crap game at the back of the office, and I would lose all my money. They were getting the margin! So I didn’t stay in the brokerage business.”

3. On making his first major commercial real estate purchase for $100,000 after ending his career as a broker.

“That was at the time that the Vancouver Sun and the Vancouver Province had merged. They had built a new building, if you remember, on Granville and 7th. The building at the corner of Cambie and Hastings became available for sale. It seemed like a nice building. I had never owned a building that size. I made an offer on it, $100,000, and they countered back. Then the building behind, the one on Cambie and Pender, came on the market and I wanted that. So I had two great buildings opposite Victory Square. But the problem was that the area wasn’t the greatest. Victory Square, where they had all the big problems. It had led the East End. Homelessness. The drug addicts. They’ve moved now a couple of blocks east, but they’re still there. Anyway, I bought the building because nobody else liked the area. So what am I going to do with the building. So I had this (former newspaper building) for $100,000, but they didn’t even broom-sweep it. That’s something that goes into a contract . . . Newsprint everywhere. There’s dirt. (The former owner) said to me: ‘Well, you own it now. It’s yours.’ So I said okay. I went through it. They used to print the comics – colour comics – and these printing presses were up on big bunker. Concrete bunkers . . . I was curious as to what was under these big printing presses under the bunkers. I went in and I took a look and I saw (what looked like) a huge painting or portrait or something wrapped in this very fragile newsprint. I took it out and I opened it, and this was a very valuable painting of the founder of Southam Press. But I didn’t like the painting. He was no relative of mine, and I decided that maybe he (had) a relative or someone else. So I went through the phone book to find somebody by the name of Southam, because the Southams were the founders of the Province. I found a Southam entry . . . and I picked up the phone and I said: ‘Are you related to this guy, whatever the name was on the painting, and he said, ‘Yes, he’s my grandfather’ or something. ‘I said, well, I’ve got this painting here and it’s a Southam painting. Would you like it?’ He said, ‘Well, yeah, what it going to cost me?’ I said, ‘The price of a cab fare. Come on down and pick it up, and I became very good friends with Gordon Southam for many, many years until he died.”

Dundee to invest $140 million in Ottawa and Toront

Dundee REIT has announced it will invest $140-million in office buildings in Toronto and Ottawa.
The trust made the announcement Wednesday while reporting third quarter funds from operation of $16.2 million, or 54 cents per unit, compared to $15.8 million, or 50 per cent per unit in the same quarter last year. Funds from operators measure profitability.
“We continue to work closely with existing and prospective tenants, and are pleased to see our efforts rewarded not only with an increase in occupancy levels in the third quarter but also increases in rent,” president Michael Knowlton was quoted in the Globe and Mail.

For more details, check out the Globe story via the link below.

Segal to speak at NAIOP breakfast

Legendary philanthropist, entrepreneur and real estate investor Joe Segal will share his views on the commercial property market during this month's NAIOP breakfast in Vancouver.
Segal , founder of Vancouver-based venture capital and development company Kingswood Capital, will explain why he has been actively investing in commercial real estate this year despite the global economic downturn. Kingswood launched in 1979 after Segal built the Fields department store chain, turned it into Zeller's and then sold the operation to the Hudson's Bay Company.
Among his many other pursuits, he has also built a clothing-store business, expanded First National Properties, formerly Block Bros., into a land development and property-investment powerhouse, acquired several clothing manufacturing companies and spearheaded the creation of Simon Fraser University's downtown campus.
the company formerly known Block Bros. into a land developm
During these years the company acquired many other clothing manufacturing companies.
In 1985, Mr. Segal acquired national retailer Collegiate Sporting Goods from Imasco. In 1986, he merged Collegiate with Sports Experts and became Chairman of both.
In 1988, Mr. Segal was instrumental in the 150 million dollar acquisition of Block Bros., a Western Canadian company in the land development and property investment field which now operates as First National Properties.
Mr. Segal served on the board of Simon Fraser University for over 12 years & was Chancellor for 6 years. In 1989, Mr. Segal was one of the individuals instrumental in establishing the Simon Fraser University Harbour Center downtown campus. Meanwhile, he has worked with, and financially supported countless charities, and provided the building virtually free of charge that now serves as the home of Vancouver's Olympic organizing committee (VANOC).
The NAIOP breakfast will be held Wednesday (instead of its usual Thursday) at the Hyatt Regency Hotel, starting at 7:30 a.m.

Sears and Bay re-think department stores

Major department stores Sears and The Bay are trying for a new look as retailers re-think the conventional mall.
Check out this story in the Toronto Star for more details.

http://preview.tinyurl.com/baysears

Data centre deal second largest in Canada this year

Canada's recovering commercial real estate market has planted another signpost along its road to redemption.
Allied Properties REIT closed its $192-million acquisition of a data centre at 151 Front Street West in Toronto on Monday. The sale of the class A office property was the second largest in Canada this year behind German institutional investor Deka Bank's unsolicited $297-million purchase of the Bentall V office building in the spring.
According to a Wall Street Journal article published last week, the deal says more about the strength of data centres than the market itself. Data-centre property values have displayed resilience during the downturn, due to the rapidly-increasing popularity of streaming video and other Internet-based services that require considerable bandwidth.
But the deal also continues REITs' recent trend of raising money on the capital markets for acquisitions.
Allied partially funded the purchase of the 325,000-square-foot property from Northam Realty Advisors Ltd., by issuing about C$125 million in new units. Allied will use about $96 million from that offering to finance part of the deal, while the British Columbia Investment Management Corp., an institutional investment manager whose clients include public pension funds, provides $96 million on a 10-year mortgage at 7.5%.
"Happily, and to my surprise, the equity capital markets came roaring back faster than we thought they would," Michael Emory, Allied's CEO, was quoted in the Wall Street Journal story. "It was a big change in the Canadian environment."
After struggling to find credit through most of 2008, other REIT CEOs and investors have been making similar comments lately. The question now is how long it will take them to close more large deals.

Brookfield's plight points to pent-up demand

Add Brookfield Properties Corp. to a growing list of commercial real estate players who have lots of money to spend, but little to buy.
The Globe and Mail reported Friday that Brookfield has $5 billion in cash at its disposal, but can't find Canadian properties that will provide the requisite 20 per cent return. Brookfield set up a $5-billion real estate investment fund in September with a sister company and dozens of major institutional players with the goal of acquiring several distressed office and mall properties.
"There really hasn't been that much out there," Brookfield CEO Ric Clark told the Globe. "When we first started thinking about this, we had many companies on the list as potential targets – the public markets have been so efficient that many have been able to solve their problems."
The situation points to the fact that many Canadian commercial property owners do not have the same debt problems as their U.S. counterparts, and tenants are not nearly as stressed, either. Canadian landlords are also showing more willingness to work with tenants to retain them.
As Avison Young's National Fall Newsletter pointed out, there is considerable activity in the Toronto office market, especially in the heart of Bay Street, as tenants take advantage of deals to move into new space or stay in their existing locations. Vancouver landlords are also expected to offer much more favourable lease terms as numerous agreements roll over following the 2010 Winter Olympics.
Vacancy is on the rise in major markets, but building owners are refusing to panic. Notably, in the retail asset class, several potential deals on malls ranging from Vancouver to Toronto have been scuttled because sellers did not get the prices that they were looking for, and properties have been quietly pulled off the market. Owners are banking that property values will hold relatively firm, and they can cash in on large equity gains later, even if they have to take less in rent now.
The same principle applies to both office and retail. The Calgary office market, where vacancy is expected to double in the short term, will definitely test this strategy as several speculative builds start to play out. But, generally, the builders of the Calgary properties have strong financial support.
Signs indicate that there is still considerable pent-up demand across the country.
While Brookfield built its $5 billion fund, several REITs and other investors were cleaning up their balance sheets and raising cash for an expected resurgence in acquisitions during the second half of this year. That resurgence has yet to materialize, and may be delayed slightly, because buyers and sellers are still trying to narrow their price-expectation gap.
Some have questioned whether REITs wanted the money primarily to manage their debts rather than acquire assets. But RioCan's recent $180-million foray into the U.S. market and Artis REIT's recent acquisitions of retail and industrial properties in Vancouver and Winnipeg, respectively, clearly indicate that some REITs are active buyers.
However, they are also having trouble figuring out where to spend their money. For instance,
many are anxious to invest in the downton Vancouver office market, where there is a shortage of class A properties, is a prime example.
The same goes for international investors who have a unique affection for Vancouver despite traditionally low cap rates.
What does this all mean? Brookfield is not the only investor with money to invest, and there is much more than $5 billion kicking around.

Canada's largest REIT begins U.S. foray

RioCan's anticipated foray into the U.S. commercial real estate market came to fruition Monday.
The Canadian REIT announced it has agreed to acquire acquire shopping malls in the northeastern and Mid-Atlantic states as well as a minority stake in a U.S. developer for $181 million US. RioCan, Canada's largest shopping mall owner, has struck definitive agreements with Cedar Shopping Centers Inc., to take an equity stake in the Port Washington, N.Y. real estate investment trust, owner of 124 shopping centres, The Canadian Press reported.
RioCan and the U.S. firm will form a joint venture with the Canadian REIT owning 80 per cent of the assets. Continuing the emphasis on food-and-drug-based assets, the partners' first properties are seven grocery store-anchored shopping centres in Massachusetts, Pennsylvania and Connecticut currently owned by Cedar.
RioCan has also agreed to take a 15-per-cent stake in Cedar that comprises 6.7 million shares and 1.4 million warrants of the U.S. company. The Canadian REIT will invest $181 million, furnishing $106 million in net equity and assuming $75 million in mortgage debt on properties.
“RioCan's objective is to take a measured and defensive approach to investment in the U.S. market,” said president and CEO Edward Sonshine.
The announcement coincided with RioCan's third-quarter report, which included a profit of $28.4-million or 12 cents per unit for the quarter ended Sept. 30 compared with a profit of $40.9 million or 19 cents per unit a year ago.
Cedar said the two companies expect to acquire up to $500-million worth of supermarket-anchored properties in the northeast and mid-Atlantic states in the next two years.
RioCan is Canada's largest REIT with a total capitalization of $7.8-billion (Canadian) and 247 retail properties, including 13 under development.

REITs hungry to buy as economy recovers

Canadian REITs continue to shore up their balance sheets in an expected run on acquisitions over the rest of this year.
Analysts estimate more than a billion dollars have been raised by Canadian REITs in the last year, says a story in Monday's The Globe and Mail.
“We think the next 18 months will be a very fruitful time for listed [property companies],” AMP Capital Brookfield chief investment officer Kim Redding told the Globe. “They are one of the few investors in the world that have capital.”
RioCan, the largest REIT in Canada, has said it would make a major purchase in the U.S. as it deploys $150 million that it raised on capital markets. Scott's REIT chief executive officer John Bitove told the Globe his company will “certainly be a buyer,” and Whiterock REIT has already jumped in by taking a large stake in an $82-million deal for Toronto office towers, which are definitely in play these days as tenants look for better deals as leases roll over.
But questions remain about whether REITs are raising capital for investment to deal with internal financial issues as they continue to recover from the global financial meltdown.
“Most REITs have taken advantage of the open capital markets,” said Mark Rothschild, an analyst at Genuity Capital Markets. “Most management teams have expressed confidence this capital will be used to take advantage of distressed opportunities – we believe that there will not be many extremely accretive acquisition opportunities and ultimately many of the recent offerings will prove dilutive.”
And despite the rash of fundraising, Mr. Rothschild told the Globe, REITs face challenges in their everyday operations that should be highlighted over the next two weeks as they report earnings. Funds from operations – a key gauge of health – are expected to have slipped lower for the first time this recession for residential REITs, while the commercial REITs could see the second decline in a row.
“Fundamentals have softened across most Canadian markets as a result of the weakening economy … vacancy rates have increased” he said.
Whiterock CEO is Jason Underwood is on the lookout for deals after his firm raised $30 million. He's confident that he has a cushion behind him in the event of another downturn, even if he can't find enough assets worth $30 million.
“REITs have raised all that money and you know they don't need a billion dollars to bolster their balance sheets,” he told the Globe. “That doesn't mean it all needs to be spent at once – I'd characterize our outlook as cautiously optimistic, so it's not a bad thing to have some money in the bank.”

Ottawa contemplates new pension-fund rules

Ottawa is aiming to boost pension-fund surpluses to help offset threats to retirees' nesteggs. Finance minister Jim Flaherty is weighing the merits of allowing pension plans to increase their surpluses from the current 10 per-cent-of-value threshold to help make up for looming pension-fund shortages. The move, once finalized, could have a significant impact on commercial real estate investment activity because it would enable pension funds to accumulate more properties.

For more details, click on the link to a story in The Globe and Mail.

http://tinyurl.com/pensionstory

Thales Group lease offers hope to T.O. market

Thales Rail Signalling Solutions Inc. (TRSS), a subsidiary of Thales Group worldwide, announced Tuesday it has leased 190,000 square feet of office space in Toronto's suburbs.
It's the largest new-space deal signed in Toronto this year, and commercial real estate insiders and observers are optimistic that it will bost sales and lease velocity.
See the linked Globe and Mail story below for more info.

http://tinyurl.com/yjv3tjz

TD Bank boss not worried about bad CRE loans

TD Canada Trust's CEO says commercial real estate loan defaults won't have a big impact on his bank's bottom line.
Speaking at an investment conference in Toronto, Tim Hockey said the bank's loan outlook remains unchanged. Hockey expects bad loan cases to rise, and their resolutions usually lag the overall economy's recovery, but he does not foresee major problems as Canada continues to rebound from the recession.
To read a Reuters story on Hockey's appearance at the Toronto event, click on the link below.

http://tinyurl.com/yku3wke

(Monte Stewart writes about commercial real estate for Avison Young. www.avisonyoung.com)

Institutional construction bucks downward trend

Canadian institutional construction continued to rise in the third quarter.
According to Statistics Canada figures released Friday, institutional construction increased for the seventh consecutive quarter, primarily as a result of higher investment in educational institutions in eight provinces and the Northwest Territories. Spending on new institutional buildings jumped 5.5 per cent to $3.3 billion on a seasonally-adjusted basis, offsetting an overall 3.9% decline in non-residential construction.
Alberta, hit hard by the recession, showed the largest year-over-year gain in institutional construction, a whopping 44%, to $660.9 million from $458.8 million in the third quarter of 2008. The large increase, which contrasted with a 14.2% decline in overall non-residential construction, was attributed to higher spending on health and educational institutions.
Quebec enjoyed a healthy 14.5% boost to $601.8 million from $525.4 million in the same period a year earlier.
Meanwhile, Ontario experienced a 10.3% rise on a year-over-year basis to $1.31 billion from $1.19 billion. However, investment dipped slightly to $from $1.32 billion in the second quarter of this year.
B.C. institutional construction increased 3.3% to $350.8 million from $339.5 million in the second quarter, but remained flat in relation to the third quarter of 2008.
The institutional-construction increases contrasted sharply with the overall decline in non-residential investment. The StatsCan figures show non-residential construction spending fell for the third straight quarter to $10.39 billion from $10.81 billion.
Alberta, Ontario and B.C. suffered the sharpest drops.

(Monte Stewart writes about commercial real estate for Avison Young, www.avisonyoung.com)

Toronto office availabilities increase

Downtown Toronto's office market is picking up as more towers come on to the market.

This article in the New York Times explains what's happening.

http://www.nytimes.com/2009/10/14/realestate/commercial/14toronto.html?pagewanted=2&_r=1&hpw

Avison Young's Fall/Winter National Newsletter also expounds on the Toronto market as many lease opporunities entice long-time tenants to move and others to stay under more favourable terms. For more details, click on the link below to access the newsletter directly.

http://www.avisonyoung.com/library/pdf/Edmonton_Brochures/Research_Articles_and_Reports/20091005_Fall_National_Newsletter_FINAL.pdf

Beedie named top Pacific entrepreneur

Commercial real estate developer Ryan Beedie has been named the Pacific region's Ernst & Young Entrepreneur of the Year.
"At a time when entire economies and industries are reeling from the financial crisis and recession, the need to innovate and be entrepreneurial has never been more urgent," said Fred Withers, director of the Ernst & Young Entrepreneur Of The Year Awards for the Pacific region, in a news release. "It's important we recognize these exemplary entrepreneurs like Ryan Beedie, who are driving our economy forward. Ryan has built his family's thriving business into a modern leader in real estate development."
Beedie is president and CEO of the family-owned and operated Beedie Group, the largest private land owner in B.C., which specializes in the design, construction and management of industrial and commercial buildings in Metro Vancouver and Alberta. The group's real estate portfolio comprises approximately six million square feet in primarily industrial buildings.
Beedie is also this year's business family category winner. His father Keith founded the 55-year-old group.
"This year's exceptional group of Entrepreneur Of The Year Award winners proves that passionate people who nurture good ideas can deliver solid results and returns over the long term," said Withers. "Entrepreneurs can follow Ryan Beedie's lead, and seize these daunting times as an opportunity to sharpen their focus, stand out from the crowd and move the markets forward. Even in the particularly hard-hit real estate industry, Ryan is making great strides and inspiring others to follow suit."
The news release also praised the Beedie family's charitable efforts. The Keith & Betty Beedie Foundation aids a number of health, education and other community initiatives, while Ryan Beedie's annual community service award benefits Simon Fraser University students.
He has also participated with and financially supported the Lions Gate Hospital Foundation, Family Services of the North Shore Foundation, and BC Children's Hospital.

Shell upgrader property gets carbon-capture funding

Ottawa and the Alberta government have promised $865-million to help oil major Royal Dutch Shell PLC develop carbon capture and storage at its oilsands processing plant near Edmonton.
In a letter of intent, the governments pledged to spend the money over 15 years on the project, which Shell said has a total estimated cost of $1.35-billion. The funding comes as governments across Canada seek to meet emission-reduction goals, curb global warming and preserve oil and gas investment.
Alberta has indicated it will contribute $745-million and Ottawa will kick in $120-million for the Quest project at Shell's Scotford upgrader.
Shell, the world's second-largest non-state oil company, is still in the early stages of developing Quest, which would start storing emissions from the plant underground by the end of 2015, Shell vice-president Graham Boje said.
“There's a couple of years of work ahead of us. There's a lot more technical work to do, and then there's also the regulatory application process and approval process, as well as consultation with people in the area,” Boje told reporters.
The government support may serve as forerunner of future funding of carbon-capture systems on large industrial projects.

For more details, check out this story in The Globe and Mail.

http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/ottawa-alberta-to-fund-carbon-capture-project/article1317268/

Avison Young plans to expand services

Avison Young is in the process of changing the real esate service provider business model.
It will take a bit of time for the transition to be complete. But Michael McKiernan, managing director of Avison Young's Chicago office and vice-president Hiren Thakar offer a glimpse of what's to come in an an interview with REJournals.com.
"The expectation is that the industry will evolve from (multiple) advisory services into one entity capable of implementing an overall strategy," said McKiernan. "Clients are looking for this. They will drive the demand because it will be more cost effective for them."
Avison Young plans to bring typical consulting services like property management and construction management under one roof and build strong client relationships as a one-stop provider with integrated solutions.

To check out the full article, click on the link below.

http://www.rejournals.com/news/213091-avison-young-evolves-with-industry

Speculative construction boosts Calgary office vacancy

Speculative new construction will boost Calgary office vacancy dramatically in the next two or three years.
According to Avison Young's National Fall/Winter Newsletter released Tuesday, about 6.3 million square feet (msf) will be added to the city’s office space inventory, an increase of 11 per cent, but only two-thirds of the space has been leased, with 2.3 msf not yet spoken for.
"Over the next two or three years, speculative new construction will be one of the biggest issues facing the Calgary office leasing market," states the report.
Avison Young, Canada's largest independently-owned real estate firm, is projecting that vacancy could reach as high as 16% (18.3% including sublease space) by spring of 2012. That would be the highest Calgary vacancy mark since the controversial National Energy Plan and the collapse of world oil prices decimated the city's economy in the early 1980s.
"Global market conditions, which combined to cause the current level of vacancy, will continue to affect the market as long as the world remains in recession," says the report. "The rapid economic downturn has resulted in corporate downsizing, merger and acquisition activity, reduced growth plans, and low oil and gas prices. All of these factors have resulted in more space being returned to the market as either head lease or sublease space, growth into new space being halted, and negative absorption being recorded for the first time in six years. Many businesses are also postponing decisions on their office space needs until the last moment as they attempt to capitalize on softening lease rates."
Once occupancy does begin to occur, says the report, both the vacancy created by new construction and any resulting backfill space will add to the existing vacancy and impact the market heavily. Vacancy is expect to remain high until job creation, corporate growth and commodity prices rise.
But there is a silver lining to the situation. As vacancy climbs, asking rents will drop.
"As vacancy increases due to a slower economy and new construction being completed, Calgary landlords will face some difficult issues," says the report.

To check out details on Calgary and the other Canadian markets in the newsletter, go to www.avisonyoung.com

Vancouver prepares for post-Olympic influences

Vancouver's commercial real estate market continues to face a shortage of available product as the 2010 Winter Olympics approach.
The shortage, especially in the coveted office class, is posing challenges for buyers and sellers as they attempt to narrow their price-expectation gap while the market normalizes following last year's period of excessive demand. However, investor confidence shows continuing improvement amidst slightly increasing vacancy.
Capitalization rates, traditionally the lowest in the country, are not expected to influence office investment greatly, although they may propmpt some industrial and retail investors to spend their increasingly-available cash in other Canadian markets. But Vancouver's strong appeal to international investors, whose love for the West Coast market often defies global crises and downturns, should help offset declines -- and bolster the average sale price, which rose to $29.2 million in the first half of 2009 from $24.5 million in the second half of 2008.
Meanwhile, the post-Olympic period is expected to shine more light on long-term investment prospects as a large number of leases and mortgages roll over. Many office tenants negotiated leases that were designed to expire after the Games so that rental rates would not spike, and mortgages are slated to mature as investors continue to deal with the effects of the U.S. sub-prime mortgage crisis.

To check out the full story, see Avison Young's National Fall Newsletter at www.avisonyoung.com

Office product fuels biggest demand

Office space was the most sought-after commercial real estate product in Canada during the first half of this year.
According to Avison Young's National Fall Newsletter, office product amounted to $1.2 billion worth of investment between January to June. But that figure was down from $2.9 billion in 2008 as the Canadian market continued to feel the after-effects of the global financial meltdown and U.S. credit crash.
Vancouver's $506 million worth of investment accounted for most of the office dollar volume. But West Coast office investment was skewed heavily upwards by German investor Deka Immobilien GmbH's surprise unsolicited purchase of Bentall V in downtown Vancouver for $297 million. That deal still stands as the largest in Canada this year.
German investors were also active in other Canadian office markets, purchasing Phase II of the Bell Office campus in Montreal for $94 million and Stampede Station Phase I in Calgary for $74 million.
Meanwhile, overall investment in office, retail, industrial and multi-family properties fell by almost 60% to $3.4 billion from $8.4 billion.

To check out the full newsletter, go to www.avisonyoung.com

Boutique hotelier builds deep loyalty

Boutique hotelier Chip Conley saw the writing on the wall, and then wrote out a new rewards program for his company.
Rick Spence has written a pretty good column in the National Post on Conley, too. Conley's plight with his Joie de Vivre chain offers guidance for hotel operators. Other commercial real estate operators across North America can also learn from it, too, as they seek to muddle through the global financial meltdown, which is still delivering after-shocks.

Check out Spence's column via the link below.

http://www.financialpost.com/small-business/index.html

Expo Real kicks off in Munich

So far, so good for the Expo Real Forum in Munich.
On the event's first day last year, the global commercial real estate market crashed and dampened the mood accordingly. But there were no reports of any calamities Monday as the three-day 2009 conference and trade show kicked off.
The trade show includes 1,600 from 35 countries. Avison Young CEO Mark Rose, president of U.S. operations Earl Webb, and Vancouver-based partner Douglas McMurray are among those representing Canada's largest independently-owned commercial real estate services firm.
Tuesday's conference schedule will examine sustainability in times of conference. Speakers include Elisabeth Merck, head of Munich's urban planning department; Holger Hagge, global head of building and workplace development for Deutsche Bank AG; and Rainer Kohns, global co-ordinator of green building activities for Siemens AG.
Meanwhile, social networks are abuzz about Expo Real. CREO Point has a special section for Twitter tweets (www.creopoint.com) and several participants are sharing news and their experiences.

Toronto buildings due to get green retrofits

An increasing number of Toronto buildings are expected to get green retrofits in coming months as landlords and tenants strive to meet LEED standards.
More than 100 leading commercial real estate companies have formed Toronto's Commercial Retrofit Initiative and Leadership Council. The new group met recently to begin hatching out a plan.

For more details, click on the link to a Toronto Star story.

http://www.thestar.com/business/article/705300#

Vancouver dubs itself Canada's green capital

Vancouver is now marketing itself as "Canada's green capital."
Mayor Gregor Robertson unveiled the new marketing slogan earlier this week. The move comes about a month after the city appointed Sadhu Aufochs as its new deputy city manager. Johnston, 35, a native of England who was raised in the U.S. and holds dual Canadian and American citizenship, will join the City of Vancouver from Chicago, where he has served as Mayor Richard Daley’s chief environmental officer.
He helped develop Chicago’s climate action plan, blue cart recycling program, green permit program, green building program and other initiatives. Vancouver commercial real estate developers and other industry insiders can likely expect to feel the effects of these moves, especially as tougher federal and provincial regulations related to greenhouse-gas reduction and climate-change prevention start to kick in.
But at least one observer questions whether Vancouver will be able to live up to its new label.

For more on Vancouver's new brand, read Bob Mackin's story in 24 Hours. http://ow.ly/snBt

Canadian takes reins of RBC's U.S. operations

For the first time in its history, a Canadian has taken the reins of Royal Bank of Canada's U.S. operations.
Jim Westlake had been serving as the company's chairman. When the company's president decided to retire, Westlake assumed the duties of CEO.
You can read about the move in today's Globe and Mail. Just click on the link below.

http://www.theglobeandmail.com/report-on-business/canadian-takes-helm-at-rbcs-us-unit/article1309367/

North American REITs trading above net asset values

REITs are causing quite a stir in the markets these days.
North American-based REITs are trading at a three per cent premium above net asset value (NAV) while U.K. REITs go for an 18 per cent discount to NAV. These were just some of the findings gleaned from the RealREIT conference held recently in Toronto, says Avison Young commercial real estate broker Sam Fogell .
Conference goers also heard the REIT market’s bottom point was a 45 per cent discount to NAV in all markets simultaneously, which was unusual because they usually flucturate, notes Fogell. North American REITs have since increased 95 per cent from their bottom prices, European REITs are trading 80 per cent higher, and Asia-Pacific region REITS are up 80 per cent.
Meanwhile, says Fogell, there was considerable discussion around proposed upcoming accounting rule changes. In the next year or so, Canadian and U.S. REITS may be required to employ International Financial Reporting Systems (IFRS) for their financial reports after using Generally Accepted Accounting Principals (GAAP) for decades.
IFRS are common in Europe. The change may reduce REIT portfolio values, because totals will be based on each property’s market value rather than its actual purchase price.
In recent months, REITs have raised $30 billion worth of new equity. It was previously believed the money was intended for the purpose of distressed properties. However, conference goers suspect REITs could use the money to pay down debt instead, say Fogell.

To contact Fogell, click on the link below.

http://www.avisonyoung.com/Our_Professionals/Vancouver/Bio/Fogell~Samuel/

Historic Yaletown building to get new look

An historic building in Vancouver’s trendy Yaletown district is about to get a complete renovation.
The Soho building at 1132 Hamilton Street, originally constructed in 1914, sits in an emerging premier location near a new Canada Line station at the corner of Davie and Mainland. Commencing in March 2010, construction crews will add three new floors to the existing three-storey building, along with a new patio and modern exterior.
Portions of the original brick interior will remain, but the exterior of the top two floors will feature a newer look as the building’s owner, Triple F Investments, a Mark James company, complies with a city requirement that refurbished Yaletown buildings have a modern appearance. The Soho is not classified as a heritage building.
Other improvements will include seismic upgrades and new HVAC, electrical, security, and safety systems. A total of 23,000 square feet (sf) will be placed above the existing 27,000-sf structure, which has a 9,000-sf floor plate.
The new facility will service office and retail clients. Avison Young, which is leasing the space for the owner, is targeting entertainment and media companies, software developers, engineers, architects and marketing and advertising firms as potential office clients.
The retail component is intended for large retailers with a head-office requirement, along with restaurants and high-end shops and services.

Ignatieff to speak to Vancouver Board of Trade

Federal Liberal leader Michael Ignatieff will speak at a Vancouver Board of Trade luncheon Oct. 13.
Ignatieff, who has come under fire after the resignation of his top lieutenant Denis Coderre, will discuss how Vancouver, the Pacific Gateway strategy and the province of B.C. fit into the Liberal vision. He will also explain how the party intends to provide a more prosperous and compassionate future beyond the 2010 Winter Olympics.
For more details on Ignatieff's speech, go to the Vancouver Board of Trade website via the link below.

http://www.boardoftrade.com/vbot_events.asp?pageID=32&eventID=1777&EventPage=ED

Canada's job market recovers

Canada's job market is stabilizing, says a new report from Statistics Canada.
Results released Monday show that new and renewable employment insurance claims fell 8.5 per cent in July, the last month for which figures are available. Ontario and B.C. led the job-market improvements.
The findings are likely to influence Canada's recovering commercial real estate market. Avison Young CEO Mark Rose and other industry leaders believe that improved employment will be the catalyst for the evential complete recovery of the Canadian office, retail and industrial real estate markets.
While the commercial real estate sector is as one broker puts it, "bumping along the bottom of the recession right now," ongoing stronger employment figures are viewed as an indicator of a fully stable market.
Part of the reduction in EI claims can be attributed to benefits expiring based on respective rules in each province. It will take a while, probably a few months, to determine the full impact of the reduced employment insurance claims, but commercial real estate insiders hope they are sign of better times ahead.
For more details on Canada's improvement employment picture, click on the link below to see a story in today's Globe and Mail.

http://www.theglobeandmail.com/report-on-business/ei-data-suggest-job-market-on-the-mend/article1304988/

Toronto's Miller to leave mayor's chair

Toronto mayor David Miller announced Friday that he will not seek re-election when his current term expires.
The move could have implications on the commercial real estate scene in Canada's largest city. You can check out a story on Miller's announcement in The Globe and Mail.

http://www.theglobeandmail.com/news/national/toronto/toronto-mayor-wont-run-again/article1301155/

Downtown Vancouver office vacancy remains low

Vancouver’s downtown office market remains tight, despite a rise in subleasing activity, local NAIOP chapter members heard Thursday.
“There aren’t a lot of large downtown office spaces,” said Avison Young principal Fergus Cameron.
“A lot of the space downtown is of a smaller size, and a lot of the space downtown comes from sublease space,” said Cameron. “The head lease market is still only 31/2%vacant.”
Cameron was speaking on a panel during NAIOP Vancouver’s monthly breakfast meeting. The panel included brokers Darrell Hurst, also of Avison Young, Mark Chambers of Cushman & Wakefield Ltd., and Rob Chasmar of Colliers International Inc. The four brokers analyzed Metro Vancouver’s sub-markets and offered brief forecasts up to 2012.
Their predictions on when average office vacancy would fall and average rents would rise ranged from the second quarter of 2010 to the first quarter of 2011.
Taking head lease and sublease space into account, the downtown market’s overall vacancy rate is 5%.
Cameron said some space is available but tenants want to preserve capital after going through tough times related to the global financial meltdown. Sublease opportunities have increased in recent months, and many sub-landlords have offered inducements as they attempt to reduce their rent obligations.
But, with many head leases coming up for renewal after the 2010 Winter Olympics, few are expected to bite on sublease opportunities.
“We’re going to see the rents and the inducements staying fairly flat in the next six months,” said Cameron.
Although subleases offer short-term rent reductions, sub-landlords may end up paying more over the long term than a tenant in a lease rollover situation, he said.
Downtown Vancouver is not slated to get any new office supply this year, and will have negative absorption of 500,000 square feet (sf). Limited new supply is expected to result in positive absorption of 100,000 sf in 2010 and 200,000 sf and 300,000 sf in 2011 and 2012, respectively.
The largest available office space in the core is resort developer Intrawest’s 96,000 sf in the Waterfront Centre, which is being offered on sublease. The next largest space is Nexon’s 37,000-sf former video game studio in Yaletown.
Upcoming vacancy of 30,000 sf or more includes the 71,500-sf of rentable space in the Hotel Georgia redevelopment, which includes office, retail and a boutique hotel as well as condos. Office space, now being marketed by Avison Young, is available for both lease and sale under a strata ownership arrangement.
Hotel Georgia , located at the northwest corner of Georgia and Howe streets, will be available for occupancy in mid-to-late 2010. Meanwhile, famed architect Norman Foster’s Jameson House at 838 West Hastings has 30,000 sf of office space available next year, while an existing building at 885 Dunsmuir has 63,000 sf and the Grosvenor building near Georgia and Burrard has 43,000 sf.
Panel moderator Tony Astles, executive vice-president of real estate services for Bentall, said the Vancouver office market, traditionally subject to considerable institutional investment, remains quite strong compared to the rest of North America.
“All in all, things are okay . . . Thank God we live in Vancouver,” concluded Astles.

Onex plans to invest in struggling U.S. market

Onex Corp. has announced that it plans to capitalize on opportunities in the struggling U.S. commercial real estate market.
"Our hope is that we will be able to partner with some of our institutional relationships to take advantage of the looming crisis in the U.S. commercial real estate industry," Onex managing director Andrew Sheiner told investors Wednesday.
Other Canadian companies with strong balance sheets and low debt have adopted a similar strategy as the U.S. commercial real estate market attempts to recover from the global financial meltdown and credit market crash. Avison Young CEO Mark Rose has made it known the brokerage firm has an aggressive U.S. expansion plan.
Onex's foray south of the border indicates the Toronto-based company could make wide-scale investors, especially as it plans to link with institutional investors, if it can find properties that fit.
Sheiner's comments were published in a Reuters article.
To check out the full story, click on the link below.

http://ca.reuters.com/article/businessNews/idCATRE58N3U320090924

League appoints former Cadillac Fairview executive as CFO

League Assets Corporation has hired a new chief financial officer.
Patrick Miniutti joins Victoria-based League after serving as managing director of real estate and financial and management advisory services firm Sunset Real Estate Services. He has also held vice-president and CFO, chief operating officer and chief accounting officer posts with Konover Property Trust, Crown American Realty Trust served as executive vice-president, CFO and chief operating officer with Konover Property Trust, Crown American Realty Trust and Cadillac Fairview Corp.
"We're delighted to have someone of Patrick's caliber and experience joining us," said League co-founder Emanuel Arruda in a news release. "He adds depth to the League team that will help us expand in the coming years."
Miniutti will work extensively with League's other co-founder, Adam Gant.
"I look forward to establishing a close working relationship with Patrick," said Gant. "Certainly, League will benefit from his background in accounting and tax, as well as in capital markets and real estate, including acquisitions and asset management."
Miniutti, a certified public accountant who holds accounting and MBA degrees from the University of Bridgeport and Michigan State, respectively, will work out of League's Victoria office.
League manages the IGW REIT, which contains a portfolio of Canadian commercial, industrial, multi-family residential properties valued at approximately $300 million. The REIT acquires and manages commercial real estate properties on behalf of 1,700 member-partners.
Taking its other investment pools into account, Leagues is manaing and developing assets that have a total build-out value of $2 billion.

Green concrete maker tries to leave imprint

A Canadian company is building a case for a greener, stronger concrete but is fighting resistance in the construction industry, writes Terry Inigo-Jones in today's Globe and Mail.
Whitemud Resources Inc., mines kaolin, a white-coloured clay, in southern Saskatchewan and turns it into metakaolin, which is used as a supplement to cement. But the firm has met with resistance.
“The cement and the concrete industry is enormous worldwide. … And they do things a certain way and they have done those things that way for years and years and years,” Barry Lester, chairman of Whitemud, told Inigo-Jones, a contributing freelancer.
“To get people to consider making a change we are trying to turn the freighter, and it takes a long time to turn it,” said Lester. “That's the challenge that we are running up against.”
Whitemud bears watching as Canada's commercial real estate industry attempts to deal with the recession and its ongoing effort to reduce construction costs.

To check out the full story, click on the link below.

http://www.theglobeandmail.com/real-estate/building-with-a-more-durable-greener-concrete/article1296004/

Rose: Avison Young has big plans in U.S.

Avison Young is laying the groundwork for a major expansion into the U.S.
Mark Rose, the Toronto-based commercial real estate company's CEO, told syndicated columnist Mike Myatt, a leadership coach who writes the Leadership Matters blog, that Avison Young plans to move into several U.S. markets as soon as possible.
"As you might expect, with the U.S. market being one of the largest and most vibrant real estate markets in the world, we have big plans for expansion in the U.S.," Rose told Myatt. "We have already established a presence in the Chicago market, and have set our sights on immediate expansion in the key markets from coast to coast. Additionally, as a diversified company, we expect to expand in all facets of the commercial markets, in all property types, in order to meet the widespread demands of our institutional and corporate clients."
Rose made the comment in an insightful interview in which he explains how and why he became Avison Young's CEO. You can check out the full interview by clicking on the link below.

http://myattleadershipmatters.wordpress.com/2009/09/17/ceo-interview-mark-rose/

Investors remain confident in Calgary market

Calgary commercial real estate investment activity will pick up this fall, says the managing director of Avison Young's Calgary office.
"Whenever you go through a period of slow activity, pent-up demand happens," Todd Throndson told the Calgary Herald. "People want to do things. There's a lot of money that's on the sidelines that is going to need to get active.
"Now it may wait as long as it possibly can before it gets active to see how far down pricing can go. But it's going to have to get active. Especially with the institutions. They are going to have to place that money into something."
Throndson made the comment following the release of Avison Young's latest Calgary investment report, which shows that overall transaction volume for office, retail, industrial, multi-family, industrial land and residential land was $842 million for the first seven months of this year with 68 sales.
The total is down$1.35 billion, or 62 per cent, from the same period in 2008. But Throndson told the Herald that investment activity will improve going into the fall as prices deflate a little and buyers indicated their willingness to pay slightly more.
"People are starting to move forward with what they think is the new reality in the world," he said. "I do think there's going to be more activity over the last four months of this year," he said.
Although the numbers are down year-to-date until the end of July, there are some positive aspects which indicate a healthy investment market, said Avison Young, including a high average price and few distress sales.
Peter Cuthbert, vice-president of real estate for Standard Life Investments Inc., told the Herald that more than five million square feet of downtown Calgary office space now under construction, including the Bow tower and Eighth Avenue Place, will create an over-supply situation. But, Cuthbert added, investors remain confident in the Calgary market.
"The interesting thing about Calgary is the stock of downtown core office is fairly tightly controlled by institutional players," he said. "So in a market like this, they're unlikely to sell out of it. The market's turned down. No one's quite sure what's going on and nobody's actually selling buildings in that segment, so how do you put a price on it?"
Standard Life, which has about 20 per cent, or one million square feet, of its portfolio staked in the Calgary and Edmonton markets, is actively pursuing acquisitions in Western Canada. He predicted the slowdown prevalent in the first half of this year will be temporary.
"We are pursuing opportunities," he said.

REITs continue to raise capital as economy improves

Canadian Real Estate Investment Trusts (REITs) continue to raise large amounts of capital for an anticipated increase in investment over the the second half of this year.
Scott's Real Estate Investment Trust announced today that it has entered into an agreement to sell, on a bought-deal basis, $20 million (all prices Canadian) of convertible unsubordinated debentures. National Bank Financial Inc., and Dundee Securities Corporation are leading the investor syndicate that is underwriting the offering.
Bloomberg reports that Artis Real Estate Investment Trust (AX-U CN), the owner of commercial properties in Western Canada, has agreed to sell 3.4 million shares for $9 each to raise about $30 million. The announcement boosted the Artis REIT unit price to a 10-month high closing price of $9.48 on Monday. Artis had 33.5 million units outstanding as of Aug. 31.
Meanwhile, shopping-centre owner Primaris Real Estate Investment Trust (PMZ-U CN) has announced it will issue at least $75 million in debentures convertible into trust units at a unit price of $16.70.
Primaris REIT units closed Monday at $14.
According to Avison Young brokers, REITs have been busy raising capital as they clean up their balance sheets, pressures related to the global financial meltdown subside, and yield rates justify more investment. The increased efforts to raise capital are viewed as signs of increasing investor confidence.
They coincide with forecasts that more attractive deals in all asset classes will come on the market in the next six to 12 months.

B.C. multi-family investment market begins to stabilize

British Columbia's multi-family investment market is starting to stabilize, says an Avison Young report released today.
"The market stumbed through the latter part of 2008 and the beginning of 2009 with barely enough sales to indicate new realistic market pricing," says Avison Young principal Rob Greer. "Now, that seems to have completely changed. The market is currently very active with a sense of renewed confidence on the part of investors."
Avison Young's Q2 2009 BC Multi-Family Investment Report shows a total of 14 multi-family-property transactions were completed in the second quarter of this year, down slightly from 17 in the first quarter. However, total dollar volume increased 51 per cent to $89.8 million from $59.3 million during the same period.
"In the second quarter of 2009, we definitely saw the market pick up," says Avison Young multi-family investment advisor Michael Brodie. "We saw quite a flurry of activity towards the end of the second quarter. The doom and gloom prevalent at the end of 2008 and in the early part of 2009 has disappeared."
According to the report, buyers have pressured vendors and their brokers to market properties based on "actual income and opportunities for real returns." Purchasers, while drawn to attractive financing available from Canadian Mortgage and Housing Corporation (CMHC) and the consistency of multi-family returns, have returned to fundamentals that emphasize cash flow.
"Individual private investors were the most active in the second quarter of 2009," says Avison Young sales associate Matt Saunders. "Most vendors continue to be private investors who are either retiring or looking to reposition their finances."
As long as specific yield targets are met, the market will continue to see a high level of activity for the rest of this year, says Greer. But landlords have to be careful not to be too aggressive with rental increases, or else suites could sit vacant for several months.
Overall, he expects the market to witness increased sales activity in both dollar volume and number of transactions in the latter half of 2009 as capitalization rates stabilize and interest rates remain at historical lows.

The full report can be viewed at http://www.avisonyoung.com/.

Beedie joins PIRET board of trustees

Vancouver developer Ryan Beedie and one of his top confreres have joined the Pure Industrial Real Estate Trust’s board of trustees.
PIRET announced Monday that Beedie and Jim Bogusz, chief financial officer for the family-owned Beedie Group, will serve as independent trustees.
"We are very pleased to announce the addition of Mr. Beedie and Mr. Bogusz to our board of trustees," said Darren Latoski, PIRET’s acting CEO, in a news release. "As Canada's only pure-play industrial REIT, we believe there will be many benefits in working with The Beedie Group, Western Canada's largest industrial landlord. The addition of these two new trustees will complement the strengths of PIRET's existing trustees."
Vancouver-based PIRET, which deals exclusively with industrial properties, also increased the board to eight trustees from six. The moves come after Beedie Industrial Projects Ltd., an affiliate of the Beedie Group, acquired 13.6 per cent of PIRET’s issued and outstanding units on July 31.
The Beedie Group specializes in the design, construction and management of industrial and commercial buildings. Since Beedie became president in 2001, the group has developed more than 17 million square feet (sf) of industrial real estate across B.C.
Its portfolio includes approximately six million sf of industrial buildings, along with significant land positions in major industrial locations in Metro Vancouver, the Fraser Valley and Alberta.
Bogusz, a chartered accountant since 1986, co-ordinates the Beedie Group’s financial management, information systems and financial reporting. He has considerable experience with real estate mergers and acquisitions, corporate strategy, and guidance through company growth and change.

NAIOP panel to diagnose Vancouver office market

Expert panelists will diagnose Metro Vancouver's office market during this month's NAIOP Vancouver breakfast.

Avison Young brokers Fergus Cameron and Darrell Hurst will join Mark Chambers of Cushman & Wakefield and Rob Chasmar of Colliers International Inc., as they discuss the global recession's impact on downtown and suburban commercial real estate markets.

NAIOP's e-mail notice on the breakfast asks whether Vancouver's office market has reached its Armageddon or is in for a soft landing. Cameron, Hurst and the other panelists will also discuss whether Vancouver has suffered as a "branch plant" city, and attempt to identify market makers and breakers.

The panel, moderated by Bentall LP vice-president Tony Astles, will also forecast local sublease inventory take-up and identify industry sectors that are expanding and shrinking.

The breakfast will be held Sept. 24 at the Hyatt Regency hotel.

Vancouver hires green building specialist as deputy city manager

Vancouver’s municipal government has appointed Sadhu Aufochs Johnston as its new deputy city manager.
Johnston, 35, a native of England who was raised in the U.S. and holds dual Canadian and American citizenship, will join the City of Vancouver from Chicago, where he serves as Mayor Richard Daley’s chief environmental officer.
“We have in Sadhu Aufochs Johnston a seasoned city administrator and a highly experienced leader who has pioneered environmental programs, strategies and regulations for the United States’ third largest city,” said Vancouver city manager Penny Ballem in a news release.
Johnston has spent six years with the City of Chicago as the mayor's assistant on green initiatives, commissioner for the department of environment, and chief environmental officer. He helped develop Chicago’s climate action plan, blue cart recycling program, green permit program, green building program and other initiatives.
A graduate of Oberlin College in Ohio and Vassar College in New York state, he has received Crain’s Chicago Business 40 under 40 and Building Design and Construction 40 under 40 awards.
“Growing up as a child, I spent many summers in Vancouver visiting family,” said Johnston in the news release. “Ever since then, as I worked to make U.S. cities green, I looked to Vancouver for inspiration. I’m thrilled to be coming to live and work in this inspiring city and to be part of a team engaged in making Vancouver healthier, greener and more environmentally friendly.”
Johnston will assume his duties with the City of Vancouver on Nov. 2.

Rose: Market returning to normal

The Canadian commercial real estate market is returning to normal, says Avison Young chairman and CEO Mark Rose in an interview with the Globe and Mail.
Rose said confidence is coming back, but the bellwether will be rising employment figures.
"When they start to rise we will know we are in recovery," he told the Globe. "Rising employment will mean there will again be increasing demand for office space, for retail and demand for industrial products and manufacturing."
Meanwhile, he anticipates new forms of mortgage-backed securities are going to fill the financing gap.
"They are just too valuable a product and fill too great a need," he told the Globe.
Rose also anticipates that lenders’ demand for 35 per cent and 40 per cent equity will come to an end soon.
"All it will take is just one lender to jump in to get the ball rolling," he says.

To access the Globe story, click on the link below.

http://www.theglobeandmail.com/report-on-business/let-the-healing-begin/article1271433/

To view the Avison Young website, go to www.avisonyoung.com

Globe reports on B.C. mid-year investment

The Globe and Mail Web site has posted a story on the Avison Young B.C. mid-year B.C. investment report. To access the story, click on the link.

Http://www.theglobeandmail.com/real-estate/bcs-wild-west-show-reined-in/article1270817/

B.C. investor confidence continues to rise

Vancouver, BC – British Columbia commercial real estate investment activity shifted downward in the first half of 2009 as the province continued to feel after-shocks from the global financial meltdown.
The 23 transactions completed in the first half of 2009 represented the lowest first-half number of deals witnessed in the province in the past seven years, according to the recently-released Avison Young Mid-Year 2009 British Columbia Real Estate Investment Review. However, investor confidence continues to improve as investor confidence continues to improve and global economic restraints ease.
Total dollar volume in the first half of 2009 fell 12% to $643 million from $734 million in the second half of 2008. (It is important to note, though, that the majority of those second-half 2008 deals were negotiated in the early part of 2008, before the fall 2008 equity market crash.)
Year-end 2009 sales volume is on track to meet last year’s level of $1.27 billion.
Industrial deals (11) outnumbered office (8) and retail (4) transactions. But office deals accounted for 79%, or $506 million of the $643 in total dollar volume, while industrial amounted to 15%, or $96 million, and retail reflected a modest 6%, or $41 million. The average sale price in the first half of 2009 increased to $29.2 million from $24.5 million in the second half of 2008 and $14.5 million in the first half of 2008.
The semi-annual report tracks office, industrial and retail investment sales in B.C. greater than $5 million.
To see the full report, go to: http://www.avisonyoung.com/library/pdf/Van_Research/Invest_MID_09.pdf