Real Estate Outlook
New Real Property Association of Canada survey shows Canadian commercial real estate markets holding up well compared to the US
TORONTO - The Real Property Association of Canada (REALpac) was pleased to release a new quarterly economic survey which will serve as a gauge of senior real estate executives' confidence in financial and real estate markets in Canada. The REALpac/FPL Canadian Real Estate Sentiment Survey measures executives' current and future outlook in three areas including overall real estate conditions, real estate asset values, and availability of capital. Three Sentiment Indices comprise the survey including a Current Conditions, Future Conditions and Overall Conditions Index.
The inaugural Canadian survey captured the thoughts of 54 leading real estate executives, including CEOs, presidents, board members, and other 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 topline findings of the survey include the following:
- Current conditions are seen as quite weak in comparison to a year ago;
significant improvement is not expected in the next year.
- Respondents report a significant decline in asset values and have
little hope for near-term improvement; U.S. asset values appear to be
- According to respondents, access to capital is severely restricted
today and any recovery is expected to be anemic.
- Canadian sentiment is in-line with U.S. sentiment, which has ticked up
since last quarter. (NB: The REALpac/FPL Canadian Real Estate
Sentiment Survey is directly comparable to the Real Estate Roundtable
Sentiment Survey, conducted by FPL Advisory Group in the United
Outlook on Real Estate Conditions
The commercial real estate executives surveyed during the first two weeks of July believe that current conditions in Canada remain quite weak in comparison to a year ago and that significant improvement is not expected in the next year. One respondent noted that "it will take economic stability and a return of the financial sector to get things moving again" while another added, "we won't see a rebound until we see some job creation and confidence in retail sales".
Real Estate Asset Values
While respondents reported a significant decline in asset values and see little hope for near-term improvement, asset values in Canada have held up better than those in the U.S. However, while top quality buildings appear to be holding their value, according to one respondent, "B and C buildings are not".
Availability of Capital
According to respondents, access to capital is severely restricted today as compared to a year ago. One respondent indicated that "money is available; it's just more expensive and comes with more strings attached". In the future, respondents expect any recovery to be slow and weak.
The Overall Index is measured on a scale of 1-100 and represents an average of the Future Conditions Index and the Current Conditions Index. To register an Index of 100, all respondents would have to answer that they believe conditions are "much better" today than one year ago and will be "much better" one year from now.
In the U.S., for the third consecutive quarter, the Real Estate Roundtable Sentiment Survey's Current Index rose from 38 in January 2009, to 41 in April, to 49 in July. Similarly, the Current REALpac/FPL Canadian Real Estate Sentiment Index rests at 50. In this inaugural edition of the survey, Canadian sentiment tracked very closely to those of U.S. real property executives, which has improved slightly since last quarter, though with a slightly more positive perspective. As one respondent noted, "Canada does not have the same degree of deleveraging issues as the U.S. The banks are not as overextended in commercial real estate. The question is whether the negative sentiment there will spill over to Canada."
"The REALpac/FPL Canadian Real Estate Sentiment Survey is the industry's most comprehensive measure of senior executives' confidence in the Canadian commercial real estate industry", said Michael Brooks, Chief Executive Officer of REALpac. "We are confident that the survey will come to be regarded as an indispensible tool and invaluable decision-making resource for federal and provincial policymakers, real estate industry participants and others, north and south of the border, who seek a timely and relevant snapshot of current, future and overall conditions in Canadian real estate markets. Real estate investors and developers make decisions today based on sentiment about tomorrow, so this survey is an important current and leading indicator for our industry" added Brooks.