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.
Friday, October 30, 2009
Tuesday, October 27, 2009
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.
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.
Monday, October 26, 2009
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.”
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.”
Sunday, October 25, 2009
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
Tuesday, October 20, 2009
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.
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)
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)
Friday, October 16, 2009
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)
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)
Wednesday, October 14, 2009
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
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
Friday, October 9, 2009
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.
"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.
Thursday, October 8, 2009
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/
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/
Wednesday, October 7, 2009
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
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
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
Tuesday, October 6, 2009
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
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
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
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
Monday, October 5, 2009
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.
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#
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#
Friday, October 2, 2009
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
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/
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/
Thursday, October 1, 2009
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/
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/
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