转贴: 2002' Real Estate Market in Canada

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<本文发表于: 相约加拿大:枫下论坛 www.rolia.net/f >
December 13 , 2001, Toronto-A review of real estate activity in major Canadian markets took place at the 10 Annual Real Estate Forum in Toronto. Michael Dosman, Chairman of the Toronto Real Estate Board’s Executive Council, Commercial Division is reporting on this session.

Despite the pall of doom cast by thoughts of a recession for the coming quarters, Royal LePage’s annual review of real estate activity in the major Canadian markets held fast to a positive note.

Sheila Botting, Royal LePage Advisor’s executive vice president suggested that the slow and gradual recovery of the GDP will likely occur in the latter part of 2002, "and the year will end up, overall in the one or possibly one-and-a-half GDP range."

Currently, the GDP has only just fallen off, said Botting, and there hasn’t been a substantial drop in occupancy to date. Nonetheless, she cautioned that the first half of 2002 would not be an easy one.

With a 9 per cent vacancy rate, strong rents and credit-worthy tenants, class A properties are quite capable of holding their positions. Some restraint in the financing markets and a weak new supply will keep rents stable. "There’s no reason," said Botting, "to think this slowdown will have the same impact of the 1990s recession." To date, investment activity remains constant from 2000.

This sector is only expecting annual sales to be up by 2 or 3 per cent this year and Botting cautioned to watch for activity in the entertainment sector, which, with its dependence on consumers’ disposable income, is more vulnerable in a harsher economic climate.

The key component to the industrial sector is warehousing and distribution, an area of business that employs 840,000 people and represents 6 per cent of GDP. Technological efficiencies and the importance of goods being delivered 24 to 48 hours from the time of ordering has resulted in a proliferation of super regional facilities in Toronto, Montreal and Calgary.

There is now a national total of 540 million square feet of distribution space which constitutes 42 per cent of our national industrial inventory. Changes to border policies are, however, beginning to affect warehousing.

Paul Morse, Royal LePage Commercial’s vice president & manager, office leasing said that companies are refocusing on reducing cost and preserving capital which means real estate and other capital expenditures have been put on hold for now. "We expect to see just 1.3 million square feet of positive absorption," said Morse adding that this constitutes the lowest rate of absorption since 1995.

He also expects vacancy rates to climb to 8.2 per cent with the high-tech sector’s subleasing activity accounting for two-thirds of the total increase in vacant space since 2000.

Across Canada class A net rents have declined by an average of 10 to 15 per cent falling to their pre-2000 levels, said Morse, explaining that this is more a return to normal pricing than it is a collapse in rent. Morse believes property owners are heading into the downturn from a position of strength and that, "net rents have already adjusted to the market realities."

Next year, Morse expects to see 5 million square feet of positive absorption and over 6 million square feet of new supply. This gap, he suggests, will bring the overall vacancy rate up to 8.4 per cent.

The GTA is an extremely well-diversified market that, by year end is likely to see vacancy rise to 7.7 per cent. As a result, we are likely to see 250,000 square feet of negative absorption (something Morse says the city hasn’t seen in nine years – when vacancy rates were just under 20 per cent).

More contraction is the diagnosis before the GTA market gradually expands to the latter half of next year. He expects to see just 1.7 million square feet of new space on the market (half of what was built this year). Tech-heavy sub-markets will continue to put downward pressure on rents. Nonetheless, leasing activity will be ready to turn up again by mid year – in time to offset the tumult of the first two quarters.

Botting closed the morning session calling attention to four major points.
1. In the short term, vacancies should rise and rents should come off slightly but at the same time, the constraints of new development and the low interest rates are providing owners with more potential for profit.

2. Canada’s five major cities are becoming increasingly important as regional economic centres and that’s more important to Canada than Toronto – a city that is currently our national business district and major corporate headquarters. (A recent Conference Board of Canada study found that economic integration in North America proceeded faster in the last decade than any of us would imagine. Free trade and the shrinking dollar drove our manufacturing output up to 140 per cent. And head offices have increasingly become regional offices for U.S.-based multi-nationals.)

3. Within North America, Central Business Districts (CBDs) are evolving into a hierarchy with 24-hour CBDs – which host business and residential activities around the clock – taking the top spot over 9-to-5 CBDs. These 24-hour CBDs command the highest office rents and property values across North America. Such spatial relationships among cities and regions are dictating the value of commercial real estate.

4. Real estate continues to be the asset of choice. In Canada, real estate represents 27 per cent of our assets – $2.7 trillion – one-third of which is in commercial real estate. Real estate continues to endure as an attractive investment - it’s a hard asset and a safe haven in these uncertain times as well as a strong hedge against inflation.

Botting concluded the breakfast with more optimism saying that: "What we expect to see in the near future is a flight to quality a search for stability and a recognition that real estate is one asset class that always has value."

Given its stable yields, low volatility and great tenant diversification, David Barry isn’t surprised many conservative investors are eyeing industrial real estate as a solid asset class. As vice president of Penreal Capital LP, he is in fact, one such investor representing the pension fund point of view on a four-member panel discussing the some of the sector’s latest trends and identifying the coming opportunities.

"When times are tough and vacancy is high," says Barry, "this cycle won’t be as deeply felt by industrial as it will for those in the office sector."
Barry expects to see a greater number of subleases not renewed in the short term and overall lease transaction activity to slow down.

Chris Lawrence of Perimis Properties agreed with Barry saying that there has been a great awakening in the markets to the benefit of industrial real estate. With regards to fears of there being a slowdown in development, Lawrence said he doesn’t see new construction in industrial tapering off to mid-90s levels. Vacancy is holding and occupancy is holding, he said.

"If we see some relief in the latter part of 2002, the impact on the industrial market will be far less significant than on other sectors," Lawrence stated, echoing the thoughts of some of the other panelists.

Joe Nestic, senior vice president with Menkes Developments Inc. said there’s nothing to fear but panic.

"The industrial sector is still strong," he said noting that between the peak of 2000 and now, rental rates have only come off by about $0.25, so that in fact, there hasn’t been an appreciable change in rent.

"As developers, the only risk we have out there is contractors panicking," he said adding that when pension funds acts as developers they sometimes conduct deals for too little driving prices down. "Without panic or fear," he added, "Toronto will do fine."

Kevin Pshebniski of Calgary-based Hopewell Developments is inclined to agree with Nestic’s perspective on Toronto saying that his firm is expecting to move into the GTA in a larger way. While it remains a dominant player in the Calgary market and continues to feel positive about that market (particularly regarding condominium product), Hopewell is always looking for large and small opportunities, said Pshebniski.

Perimis Properties’ Chris Lawrence pointed out that industrial is a sector favoured by many because "industrial costs less to own in the long run. That’s why people like it," he said. "The key is to just buy product with good physical characteristics like location and construction."

Nestic said opportunity lies with in-fills. "Find the right spot and build one building at a time," he counseled saying that the GTA was a "meat and potatoes" market (plastics, chemicals, manufacturers) and that such products will always need to be produced, warehoused and distributed, regardless of the economic climate. "Seasoned pros in Toronto," Nestic said, "will make money."


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2002-1-5 -04:00

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