Emerging Trends in Real Estate 2012 - Urban Land Institute

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and environmental regulations will complicate development initiatives and increase costs. For now, “institutions have nothing to buy.” . . . In New Brunswick, Fredericton and Moncton could also be development plays. Local families make very strong returns. . . . The prairie outpost of Saskatoon (6) benefits from oil patch spillover and a favorable commodity cycle, including flush potash prices. Investors cannot find much to buy because there is not much to trade. “Local owners are holders.” The market “could be a development play. It’s a place to watch for the future.” . . . Winnipeg (9) boasts some of the nation’s lowest office, retail, and industrial vacancy rates, but offers limited investment opportunities. Property Types in Perspective In 2012, Canada’s property sectors, except hotels, should bathe in a comfortable equilibrium of high occupancies, steady Exhibit 5-18 Prospects for Commercial/Multifamily Subsectors in 2012 Apartment: Moderate Income Central City Office Neighborhood/Community Shopping Centers Warehouse Industrial Apartment: High Income Power Centers Regional Malls Investment Prospects 6.31 6.28 5.83 5.71 5.71 5.67 5.54 Exhibit 5-17 Prospects for Major Commercial/Multifamily Property Types in 2012 Apartment Investment Prospects 6.06 R&D Industrial Suburban Office Limited-Service Hotels Full-Service Hotels 5.38 5.22 4.97 4.58 Office Industrial/Distribution 5.87 5.67 Apartment: Moderate Income Central City Office Development Prospects 5.33 5.33 Retail 5.65 Neighborhood/Community Shopping Centers 5.13 Hotel 4.79 Warehouse Industrial 5.41 Apartment Development Prospects 5.57 Apartment: High Income Power Centers Regional Malls 5.07 5.00 4.53 Office 5.03 R&D Industrial 5.15 Industrial/Distribution 5.23 Suburban Office 4.43 Retail 5.24 Hotel 4.16 1 abysmal 5 fair 9 excellent Limited-Service Hotels Full-Service Hotels 4.76 3.95 1 abysmal 5 fair 9 excellent Source: Emerging Trends in Real Estate 2012 survey. Note: Based on Canadian respondents only. Source: Emerging Trends in Real Estate 2012 survey. Note: Based on Canadian respondents only. 68 Emerging Trends in Real Estate ® 2012
Chapter 5: Emerging Trends in Canada Exhibit 5-19 Prospects for Niche and Multiuse Property Types in 2012 Urban Mixed-Use Properties Infrastructure Mixed-Use Town Centers Medical Office Self-Storage Facilities Master-Planned Communities Data Centers Lifestyle/Entertainment Retail Master-Planned Resorts Resort Hotels Investment Prospects 6.46 6.35 6.33 5.92 5.41 5.25 5.03 5.00 4.03 3.84 Development Prospects rents, and level demand. Vacancy rates settle in the mid- to high single digits across office and industrial markets, and even lower in retail and apartments. Development remains controlled without the threat of overbuilding unless buyer demand for condominiums declines dramatically in Toronto, Vancouver, and Montreal. For investment, survey respondents favor apartments, downtown offices, and neighborhood shopping centers over suburban office space and hotels (exhibit 5-18). On the development front, “everything looks stable; rents are about the same as ten years ago, and all the caution about the world debt crisis will keep construction under control. It’s more of the same.” Apartments. The multifamily residential sector will stay tight as continuing immigrant flows sustain demand in the major cities. Even if job growth declines and homebuying cools, apartments should be “a safe haven.” When people have less, they rent. Increasing numbers of younger adults delay buying houses; they simply cannot afford them after recent price spikes. Aging demographics also favor more apartment demand: empty nesters and seniors move out of suburban homes into smaller, easier-to-maintain units with urban conveniences. Apartment developers can readily obtain construction financing, but thin margins dampen interest: renters look for higher-finish condo-quality buildings, Exhibit 5-20 Canadian Apartments—Moderate Income Urban Mixed-Use Properties Infrastructure Mixed-Use Town Centers Medical Office Self-Storage Facilities Master-Planned Communities 6.64 6.58 6.29 5.83 5.56 5.09 2012 Prospects Rating Ranking Investment Prospects 6.31 Modestly Good 1st Development Prospects 5.33 Fair 3rd Buy 51.7% Expected Capitalization Rate, December 2012 5.7% Source: Emerging Trends in Real Estate 2012 survey. Note: Based on Canadian respondents only. Hold 39.7% Sell 8.6% Data Centers Lifestyle/Entertainment Retail Master-Planned Resorts 4.91 4.88 3.55 Exhibit 5-21 Canadian Apartments—High Income 2012 Prospects Rating Ranking Resort Hotels 3.52 Investment Prospects 5.71 Modestly Good 5th Development Prospects 5.07 Fair 6th 1 abysmal 5 fair 9 excellent Buy 29.8% Hold 52.6% Sell 17.5% Expected Capitalization Rate, December 2012 5.4% Source: Emerging Trends in Real Estate 2012 survey. Note: Based on Canadian respondents only. Source: Emerging Trends in Real Estate 2012 survey. Note: Based on Canadian respondents only. Emerging Trends in Real Estate ® 2012 69
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Emerging Trends in Real Estate ® C
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Executive Summary F or 2012, U.S. r
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Exhibit 1-1 Importance of Various I
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Exhibit 1-3 Index Returns: Real Est
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gateway cities at or near market bo
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Exhibit 1-8 Firm Profitability Fore
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occasional build-to-suits, the odd
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chapter 2 Real Estate Capital Flows
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Page 81 and 82: Chapter 6: Latin America Exhibit 6-
Page 83 and 84: DLC Management Corp. Adam Ifshin DL
Page 85 and 86: The Sorbara Group Edward Sorbara Pa
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Emerging Trends in Real Estate 2012 - Urban Land Institute

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