Real estate investors will be more active in 2014

The Canadian real estate market will maintain its strength next year, according to a report by PwC and the Urban Land Institute (ULI).

While the outlook for development of all property types is good, continuing urbanization and reverse migration trends are expected to be an especially important considerations for developers and investors. In particular, live/work/play development offerings along or near mass transit lines will be essential.

Read: Contractors to build more homes “There will be a continued demand for retail, office and residential space in our urban centres where there is easy access to mass transit,” says Lori-Ann Beausoleil, partner and National Real Estate Leader at PwC. “Competition for these sites and uses will continue to place pressure on developers to reformat their product offerings to optimize space as these locations become scarce.”

Read: 2014 will be better: Tal Rental market not derailed by condos

The report also states condominium developments in major urban centres have not hindered the market for rental apartments—in fact, rental apartments are considered a very attractive investment in Canada’s largest cities, particularly as condominiums are often purchased and then rented out at premium rates. Tighter mortgage rules — which have made buying a home more difficult — together with continued immigration and lifestyle-choice renters, could significantly improve the economic landscape for purpose-built rental apartments in Canada’s major centres.

Read: Adapt to wealthy client needs, or else “As home prices in the major cities stay high, renting is a reality for many Canadians and real estate investors are happy to capitalize on this need,” says Mark Noskiewicz, ULI Toronto chair.

Strong economy part of success

Canada’s economic strength has played a significant role in keeping real estate prospects strong, according to the report. Canada’s resilient performance in the wake of the 2008 recession has made it an appealing place for investors to develop and in turn, Canadian investors are also active in the U.S. and overseas markets. Perhaps most telling is the fact that Canadians are now the United States’ largest non-domestic real estate investors, with $10.7 billion invested into U.S. properties over the past 12 months.

Read: Got snowbirds? Check these tax changes And, building on Canada’s prosperity, American and European retailers — including Nordstrom, Zara Home, Marshall’s, Tanger Outlets, Bloomingdale’s and J Crew — recognize the strength of the Canadian consumer as the trend to find Canadian locations for their stores continues.

“With the U.S. economy on the upswing, we are likely to see even more activity between the two countries,” says Beausoleil.

Read: Canada’s homes too expensive Other highlights include:

• Developments will remain well-funded, as capital is expected to remain available for high quality projects that meet more stringent lender requirements. The best projects managed by the best borrowers will be funded, leaving those that do not meet these criteria to seek alternative capital sources that typically have higher costs;
• As cap rates stabilize or move slightly higher, cost and energy optimization programs will help to maintain assets and increase yield opportunities. Programs that build on the profile, attractiveness and cash flow of assets will likely offset the erosion of rising cap rates on property yields; and
• Calgary ranks number one among major Canadian cities to watch for the second year in a row, followed by Edmonton, Saskatoon, Vancouver, Toronto, Winnipeg, Ottawa, Halifax and Montreal.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.