Emerging Trends in Real Estate 2012 - Urban Land Institute

Exhibit 5-9
Prospects for Capitalization Rates
Property Type
Cap. Rate
August 2011
(Percent)
Source: Emerging Trends in Real Estate 2012 survey.
Note: Based on Canadian respondents only.
Expected
Cap. Rate
December 2012
(Percent)
Expected
Cap. Rate
Shift
(Basis Points)
Apartment: High Income 5.40 5.43 3
Apartment: Moderate Income 5.75 5.69 (6)
Regional Malls 5.92 5.94 3
Central City Office 6.14 6.15 2
Warehouse Industrial 6.65 6.60 (6)
Power Centers 6.55 6.67 12
R&D Industrial 7.00 6.95 (5)
Neighborhood/Community
6.98 6.95 (3)
Shopping Centers
Suburban Office 7.02 7.16 13
Full-Service Hotels 7.60 7.66 6
Limited-Service Hotels 7.81 7.88 8
dream of marrying and raising children in a house and yard.
Toronto (1). Canada’s preeminent global gateway, Toronto
dominates the country’s business landscape, concentrating
financial services and industrial activity. “It’s where people
want to be: the bulk of immigration heads there.” In a “close to
bulletproof” office market, rents have firmed just as the important
banking sector starts to cut back, “putting a cap on office
development.” Institutions own 75 percent of downtown buildings:
“They effectively work in concert to keep vacancies low
and avoid shooting themselves in the foot.” “Spotty” suburban
office space suffers from move-back-in trends favoring downtown
locations. Commercial nodes situated near mass transit
stations perform better. About half the nation’s industrial space
is located in the Greater Toronto area (GTA); the manufacturing
dip hits older warehouses harder, but new higher-ceiling space
Exhibit 5-10
Canadian Markets to Watch: Prospects for
Commercial/Multifamily Investment and Development
Markets to Watch
Toronto and Vancouver retain their top survey rankings, boosted
by international gateway status and diversified economies.
Calgary and Edmonton rebound with recent energy market
gains, while Ottawa benefits from its large and sustaining government
jobs base. Montreal holds steady, and Halifax shows
new strength from ramped-up energy exploration activity off
the East Coast. In general, major metropolitan areas actively
encourage development of downtown residential space and try
to discourage suburban sprawl, creating growth boundaries.
They look to control costs on building and maintaining expensive
transportation, sewage, and water infrastructure to outlying
districts, and to relieve increasing traffic congestion. These
moves should enhance already-attractive 24-hour environments
in these cities and position them to deal with expanding populations
over coming decades. Local planners may need to pay
greater attention to providing parks and other recreational space
in and around new condominium corridors located near center
cities. Especially in Toronto, the proliferation of new apartment
towers leaves residents without immediate access to playing
fields or nearby green environs. The accommodations may work
for young professionals more interested in the local bar and
restaurant scene, but do not accommodate the needs of families
with children. Limitations on single-family housing projects,
meanwhile, increase values on highly coveted suburban homes
located in inner rings. Some interviewees wonder whether
prices will become unaffordable for many families, killing the
Toronto
Vancouver
Calgary
Edmonton
Ottawa
Saskatoon
Montreal
Halifax
Winnipeg
Toronto
Vancouver
Calgary
Edmonton
Ottawa
Saskatoon
Montreal
Halifax
Winnipeg
Investment Prospects
6.70
6.61
6.33
6.24
6.00
5.47
5.28
5.02
5.00
Development Prospects
5.92
6.43
5.64
5.47
5.26
5.42
4.57
4.32
4.58
1
abysmal
Source: Emerging Trends in Real Estate 2012 survey.
Note: Based on Canadian respondents only.
5
fair
9
excellent
64 Emerging Trends in Real Estate ® 2012