Canadian executives see positive trends in commercial real estate

Overall, Canadian executives' sentiment on the real estate market has moved up meaningfully over the past quarter, more so than in the U.S, according to a new survey. 

The Canadian Real Estate Sentiment Survey, recently released by the Real Property Association of Canada (REALpac) and FPL Advisory Group, is identical to a survey of real estate executives in the U.S., which allows for a reliable, direct comparison between the two markets. 

“Canada is in far better shape than the U.S.,” said one respondent. “Our banks are in good shape and they're lending. Unemployment is up, but it’s not too bad. Overall, the fundamentals here are good.”

In the most recent edition of the Commercial Real Estate magazine, published by the Commercial Division of WinnipegREALTORS®, division chairman Don White said local players in the commercial market have accepted that the worst of the economic  crisis is over, and it’s now time to start working on new lease and sale initiatives to ensure the best times of the recovery are not missed. 

The REALpac/FPL index rose from 50 (out of an index of 100) in July to 68 in October. In the U.S., for the third consecutive quarter, the index rose from 38 in January 2009, to 41 in April, to 49 in July, to 63 in October.

More respondents are seeing positive real estate market trends and conditions as compared to the third quarter of 2009, but any movement is expected to be slow. 

“We will see velocity again by Q3 2010, and a return to normal by 2013,” said one executive.

Real estate asset values are seen as now materially down, but expectations are up and respondents still report stronger pricing than in the U.S. 

Debt capital availability is seen as greatly improved since the last quarter, although it is still far from what was seen in 2007, and respondent perspectives on equity capital availability continue to track above those for debt capital. 

“Equity has been tough since last November, now it’s available, not in huge amounts, but it’s there,” said one respondent.

The survey captured the thoughts of 39 leading real estate executives, including CEOs, presidents, board members, and other top executives from a broad set of real estate sectors including owners and asset managers, financial services providers, and building operators and related service providers. Survey respondents represent income-producing real estate including office buildings, retail shopping centres, industrial buildings, hotels, multi-family residential (apartment buildings), and seniors residences. 

The survey measures executives’ current and future outlook in three areas, including overall real estate conditions, real estate asset values, and availability of capital.

White said in the last quarter of 2009, the commercial real estate market in Winnipeg “should generate a very healthy supply of new lease and sale transactions as a result of several major deals currently in the works.”