Emerging Trends in Real Estate 2012 - Urban Land Institute

Chapter 5: Emerging Trends in Canada
Exhibit 5-15
Canadian Industrial/Distribution Buy/Hold/Sell
Recommendations by Metropolitan Area
Exhibit 5-16
Canadian Hotel Buy/Hold/Sell Recommendations
by Metropolitan Area
Industrial/Distribution
Buy
Hold Sell
Hotel
Buy
Hold Sell
Calgary 43.40% 41.51% 15.09%
Calgary 14.63% 60.98% 24.39%
Montreal
15.22% 58.70% 26.09%
Montreal
18.92% 51.35% 29.73%
Toronto
36.77% 48.53% 14.71%
Toronto
30.19% 49.06% 20.76%
Vancouver
36.77% 57.35% 5.88%
Vancouver
39.62% 47.17% 13.21%
0% 20% 40% 60% 80% 100%
Source: Emerging Trends in Real Estate 2012 survey.
Note: Based on Canadian respondents only.
0% 20% 40% 60% 80% 100%
Source: Emerging Trends in Real Estate 2012 survey.
Note: Based on Canadian respondents only.
opment features high-rise construction, and population growth
concentrates within urban boundaries. Old hotels charge “shockingly
low” room rates despite higher-than-average occupancies;
developers come up empty for financing new lodging product.
Montreal (7). One of North America’s most attractive cities,
Montreal transforms itself, converting from old manufacturing to
new-economy industries, including high tech, health care, electronics,
and web design. Two new hospital complexes are under
construction, and major universities like McGill and the University
of Montreal lure 200,000 students into the city, helping energize
the new direction. “Quebec is ahead of other provinces in using
education as a business catalyst.” Younger workers want to live
downtown, which features an array of cultural, entertainment, and
sports attractions, and eager developers jump-start condo construction,
now second only to Houston in North America. Plenty
of available sites along the St. Lawrence River offer outstanding
views of the cityscape. Land is cheaper than in either Toronto or
Vancouver, and most units sell to owner-occupiers, not speculators.
Bell Canada’s move to a new suburban office complex has
softened downtown Class A space and mothballed construction
for years. However, two or three multiuse projects, including
residential and retail elements, finally may come off the drawing
board to meet renewed urbanizing demand. The industrial sector
presents a weak spot: the strong Canadian dollar and U.S. problems
dim the important manufacturing sector. The same issues
hurt hotel businesses: travel from the States remains extremely
lackluster. But the city regains its footing, leaving behind past
political turmoil over language and secession, which scared
away business and limited growth.
Halifax (9) and the Maritimes. Halifax and other Maritime
cities draw more investor and developer attention now that
energy companies are moving into the region to exploit newly
discovered offshore oil and gas reserves. A venerable government/military/university
town, Halifax has lagged other Canadian
cities in urbanizing trends. Residential and office development
concentrates in easy-to-build peripheral areas away
from the ”hollowed-out” downtown, where preservation-related
restrictions and lack of forward-thinking planning for swaths
of government-owned land have sidelined builders for years,
interviewees say. Low downtown office rents also stymie any
case for new projects. With Halifax not being much of a condominium
market, apartment developers find a more open playing
field there than in other Canadian cities. “You see lots of cranes
in the burbs.”
Other Markets. In Quebec City, the provincial government
undergirds a mature market always in the shadow of Montreal.
Apartments, as well as office, retail, and industrial space, all
show high occupancies, providing steady returns. Office and
industrial properties offer best development opportunities.
Condo construction will slow as demand softens. . . . Small but
booming, St. John’s, Newfoundland’s biggest city, catches
fire from the sudden energy boom. “No commercial space is
available; there’s zero vacancy.” The scramble by energy companies
and related businesses to glom onto the offshore action
“pushes hotel and office rates up to Toronto levels.” Left off radar
screens for years, the town needs new building and upgrades
to outmoded facilities. “We need new everything”—condos,
hotels, offices—but limited numbers of sites, high union costs,
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