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The US commercial market continues to show improvement while there's guarded optimism on this side of the border, according to a 2014 real estate forecast report released by Avison Young this morning. (So don't say it out loud or you'll jinx it.)  The annual report covers the office, retail, industrial, and investment markets in 36 Canadian and US metro areas. Ongoing development on this side of the border remains an encouraging sign, AY chair and CEO Mark Rose says, but the impact of rising interest rates remains the overriding issue. (Rising interest rates have replaced the Boogeyman as the most frightening story to tell misbehaving children.) “The 15-year decline in interest rates and related cap-rate compression that was the driver of returns had to come to an end at some point,” Mark says. Quality assets will remain in great demand going forward, he adds.  On the investment end, Mark points to pricing stability in the market resulting from healthy demand from pension funds and institutions and their substantial discretionary capital replacing what had been a voracious appetite of the REIT market. The pensions and institutions use lower levels of debt when making acquisitions. Also, out of the 36 office markets, 24 saw vacancy rates decline in 2013, with a greater number of US markets seeing an improvement compared to Canadian markets.  AY VP and director of research (Canada) Bill Argeropoulos says it's not surprising to see the commercial real estate market in Canada pull back a little. “Keep in mind, while other property markets around the world were wallowing in recession, Canada bounced back fairly quickly,” Bill says. “If anything, we are well positioned to exploit our proximity to the US, which is still the home of the globe's largest economy.” (In the image is the Royal Bank Plaza at Bay and Front—according to the report, the Canadian office market vacancy rate was 8.3%, compared with 13.9% in the US.) |
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Great Untapped Market Most people who have gone through the university or college experience have either horror or comedic stories revolving around off-campus housing. (Burst water pipes, fiery curtains, or furniture nailed to the ceiling all come to mind.) “Right now many kids are living in illegal apartments or run-down housing,” CHC Realty Capital Corp CEO Mark Hansen tells Bisnow. CHC, a capital pool company based in Toronto, announced it has entered into an agreement to buy the Liberty Terrace student housing property in Kingston for $2.5M. The property has 18 beds and just over 1,100 SF of ground-floor commercial space (100% leased to two tenants) and is just over one kilometre from Queen's University. Snapped is Liberty Terrace.  For CHC, the student housing market is relatively new ground, having made its first acquisition in April 2012. The company owns four other properties--Hamilton, Oshawa, and two in Waterloo--through limited partnerships, making them one of the largest owners of student off-campus housing properties in Canada (2,000 beds). The Liberty deal serves as a case study in CHC's growth strategy as they target both existing product for acquisition and new-build opportunities in partnership with other developers in close proximity to major universities in proven markets across Canada. “Student housing in Canada has been non-existent as a market,” Mark says. “It's a proven market everywhere else in the world. There is a critical mass of kids here and not enough supply.” Snapped is West Village Suites in Hamilton. |
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Over $2B in Hotel Transactions |
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 Volume in Canadian hotel transactions grew by over two-thirds year-over-year in 2013, with significant increase in average per room pricing and average deal size, according to a new Colliers study released today. The reason: (More people are going skiing?) Much of the activity came down to asset sales in major urban markets across the country. Most of the investment activity was in the GTA—an estimated $650M in volume, compared to $289M in 2012. One of the highlights: the $765M sale of the Westin Canadian portfolio. |
 Colliers VP Robin McLuskie (with colleague Russell Beaudry) tells us that with the GTA accounting for a third of the national transaction volume, there is high demand for new offerings coming to market. “Going into 2014, most investors indicated their primary strategy is to buy or hold hotel properties,” she says. “Not surprisingly the GTA continues to be of significant interest to investors with several of the city's submarkets receiving the highest rankings.” |
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Crestpoint Portfolio Doubles In Size |
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 Crestpoint Real Estate Investments is off to a robust start in 2014, with the announcement they have doubled the size of their portfolio (to $600M) with the acquisition of five commercial properties in Toronto, Montreal, and Vancouver. (Their travel expense bill just shot up.) |
 Company president and CIO Kevin Leon says one of the assets—the 644k SF Steeles Tech office complex in Northeast Toronto, which is 98% occupied—is one of the “best suburban office developments in the country,” with 20 acres available for future development, easy access to public transit and highways and a strong tenant roster. Crestpoint is part of the Connor, Clark & Lunn Financial Group, an international company managing $46B in real estate assets for investors. |
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