Perspectives

Canadian CRE Executives Optimistic, by REALpac/FPL

File Type: Free Content, Article
Release Date: March 2014
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The REALpac/FPL Canadian Real Estate Sentiment Survey for the first quarter of 2014 indicates that, for the first time in a year, senior commercial real estate executives in Canada feel that things are looking up for the industry. The survey, which is conducted by the Real Property Association of Canada (REALpac) and FPL Advisory Group (FPL), questioned CEOs and other industry executives in January about their current level of confidence in the business, including their views on overall real estate conditions, access to capital markets and real estate asset pricing.

Despite encouraging industry fundamentals, “broader economic concerns have tempered overall sentiment within the Canadian real estate market,” the report notes, adding that “there is a lack of consensus regarding go-forward asset pricing; some expect continued increases, some forecast a softening, and others anticipate stability.” Debt availability continues to be strong, and respondents generally see financing terms as reasonable despite conservative underwriting standards. Institutional equity also is abundant, as demand for high-quality real estate continues.

REIT investors appear to have been spooked by the prospect of higher mortgage costs down the road, while yield-hungry investors found themselves with more options. And although the sentiment survey found that executives are a bit more optimistic overall, they still have plenty of concerns, and some are more optimistic than others.“From a landlord’s perspective, the market continues to be positive, and from a tenant’s perspective there are a reasonable number of options,” said one respondent. “I think that will continue for the foreseeable future, despite the new supply coming to the market that people are concerned about.”

“The resource boom is over, our manufacturing sector remains weak, growth in financial services has slowed dramatically, housing is weakening and the consumer is overburdened with debt,” said another executive surveyed. “Add the Internet revolution in retail, space rationalization in office, and a pending over-supply of condos for rent in Toronto and Vancouver – it is time to be strategic and careful with your bets!"