Summary: Canadian CMBS returns, specifically office and retail, are expected to be positive, though tempered by comparison to recent years. Conservative lending, recourse loans, and low volume issuance have contributed to low default rates for Canadian CMBS (1.9% default rate in Canada compared to 13.7% in US). Stable employment, low vacancy rates, rent growth in Montreal and Vancouver, oversupply of condos in Toronto and Montreal, and economic growth stemming from the oil and gas industry in Alberta, Manitoba, and Saskatchewan are expected.
New York --(Business Wire)--
Canadian CMBS will likely perform positively in the near term, Fitch Ratings says. We expect retail and office properties to be positive but slightly lower than they have in recent years. Also, Canadian transactions have had extremely low default rates over the past 15 years. In 2Q13, we calculate a cumulative default rate of 1.9% of issuance by balance. The U.S. rate for the same period was 13.7%. In our view, more conservative lending, the commonality of recourse loans, and the relatively small amount of Canadian CMBS issuance and lending explain much of the difference.
Our view of the office market is rooted in our expectation that Canadian unemployment will remain stable through 2015 at approximately 7%. Nationwide the average vacancy rate in the second quarter was 8.7%. Rents have been growing in Montreal (4.2%) and Vancouver (3.0%) over the prior year.
Over the longer term, we observe some trends in multifamily housing that could slow its growth. The vacancy rate at the end of the second quarter was under 3%. But an oversupply of condominiums in Vancouver and Toronto may be forming. Those markets also have higher youth unemployment rates than the rest of Canada.
We expect the Canadian economy to grow 2% annually from 2013 to 2015. Much of the strongest growth has been in Alberta, Manitoba, and Saskatchewan and is partially attributable to the expansion of the oil and gas industry in those provinces.
http://www.businesswire.com/news/home/20131014006126/en/Fitch-Canadian-CMBS-Market-Stable-Losses-Rare
Showing posts with label Canada. Show all posts
Showing posts with label Canada. Show all posts
Tuesday, October 15, 2013
Saturday, October 12, 2013
Langley emerges as hot prospect for business developers
Summary: Vancouver based Madison Pacific Properties purchased 12 office/industrial properties for $60 million, including three in Langley, where Madison hopes to capitalize off of the otherwise expensive real estate for regional industrial manufacturers who want to shift eastward toward lower leasing costs, but are stifled by the Agricultural Land Reserves surrounding Vancouver. Specifically, the Langley neighborhoods of Clayton Heights and Willoughby are growing at "unbelievable rates" according to Cushman Wakefield Senior VP of Industrial RE. (He projects future growth in Pitt Meadows, Abbotsford, and Mission.)
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| The 700-acre Gloucester Industrial Park, in northeast Langley on the Trans Canada, and connecting to all major railway lines, goes for $950,000 to $1.1 million per acre plus development cost charges and site preparation.Photo by: Handout, Cushman Wakefield |
Vancouver --(Vancouver Sun)--
In a blockbuster cross-Canada deal of more than $60 million, Madison Pacific has bought 12 office/industrial properties, including three in Langley. With the Agricultural Land Reserve severely limiting development closer to Vancouver, the Fraser Valley township is fast emerging as a B.C. commercial real estate hotspot, according to industry experts.“The Langley site in particular is strategic in that it represents 21 contiguous acres of land with over a kilometre of frontage on the Trans-Canada Highway,” says Robert Gritten, principal at Avison Young, which led the 12 deals for Madison Pacific. “As Madison Pacific invests for the long term, the opportunity this site offers for redevelopment is dramatic.”
Like all properties in the deal – to a total of 540,000 square feet of office/warehouse/enclosed storage space on 98 acres of land – the Langley ones have only 13-per-cent site coverage, compared to traditional industrial averages of 40-50 per cent. All are tenanted by Burnaby-based Taiga Building Products.
Referring to “the stifling effect” on Metro Vancouver of the ALR restrictions established by the Barrett NDP government starting in 1973, Gritten says: “As a result of this supply-demand imbalance, yes, we are more expensive than most, if not all, markets in North America. The geographic advantages that make this city such a great place to live actually work to a disadvantage when we attempt to meet the demand of our industrial manufacturers and distributors. They want and need to be here. We are the gateway for Canada to Asia, but it is so difficult to secure suitable premises for most of our user clients.”
No surprise, then, that developers are turning hungry eyes to Langley, with “its good supply of vacant land,” Gritten says. “It’s a natural extension.”
“In looking at demand in the Lower Mainland, we’re seeing a substantial eastward shift,” says Bill Hobbs, senior vice president, Industrial, with Cushman Wakefield. “Based on the tight supply, one looks farther out in valley. Port Kells [in northeast Surrey] has been substantially eroded in terms of available product. There’s significant eastern migration into Langley Township.”
Hobbs sees the Langley neighbourhoods of Clayton Heights and Willoughby “growing at unbelievable rates” as businesses shift east. The 700-acre Gloucester Industrial Park, in northeast Langley on the Trans Canada, and connecting to all major railway lines, goes for $950,000 to $1.1 million per acre plus DCCs (development cost charges) and site preparation.
For Madison Pacific, the nation-wide deal through Avison Young “was an opportunity for us to acquire a geographically diverse portfolio with good leveraged returns in properties that have long-term additional development potential,” says President and CEO Marvin Haasen. “One of our objectives has been to expand beyond the Lower Mainland where the majority of our assets are located. We have achieved this objective with the purchase of this portfolio, as 60 per cent of the properties are located outside the Lower Mainland.”
Still, Haasen says, “there continues to be strong investor interest for Lower Mainland properties. Demand is high while the supply of available properties is limited, so pricing is more aggressive.” He likes the three Langley properties for their “strong fundamentals.”
For Hobbs, the increasing strength of Langley was inevitable from the moment politicians completed their “tightly drawn” ALR lines in 1975. “I’ve been calling this one for 26 years” – his time in the business to date. “Now we’re seeing a doubling of the population. Now all of a sudden we’re going to see continued growth in the next one to two decades.”
According to a Cushman Wakefield document, Langley’s economy is not only fast-growing but increasingly diverse, with a favourable tax base, skilled labour force, state-of-the-art manufacturing industries, a strong retail and service sector, and many internationally operating and export-oriented companies moving in. These factors, plus “the proximity of Langley to Vancouver, Seattle and overseas markets have made the Langley area attractive for investment and development.”
But the migration isn’t stopping at Langley. Watch for a surge into Pitt Meadows and Abbotsford, and even north into Mission, Hobbs predicts.
The other properties acquired in the mammoth Madison Pacific deal are in: Kelowna; Edmonton (two); Calgary; Sudbury, Milton and Monetville, Ontario; Boucherville and St. Augustine, Quebec.
The transaction, which closed Sept. 12, involved eight Avison Young offices across Canada. Avison Young also represented Taiga Building Products in 2006 when the portfolio was sold to Argo Ventures.
Foreign buyers boost commercial real estate investment
Summary: Canadian, European, and Middle Eastern investors, ushered by the hospitable lending environment, are looking to make real estate investments in the U.S. The new wave of foreign investors have focused on the East and West Coasts. but are projected to move inland toward Dallas and Houston, which have the attractive job growth and population growth foreign real estate investors find attractive. The asset class is itself an attractive alternative to volatile securities markets. Foreign investment is expected to reach $350 billion this year, up 30% from last year, though still below the 2007 record of $570 billion. It is a sellers market as commercial real estate supply is low.
Dallas --(U.S. Dallas News)--
The commercial real estate market is quickly making up ground lost in the recession.
And so far higher interest rates haven’t rained on the parade of investors looking to take advantage of the market.
A surge in foreign investment in this county’s property markets is also underway.
“The amount of capital that is coming from foreign investors in the U.S. is going to accelerate pretty dramatically,” Mark Gibson, executive managing director of HFF LP, told real estate executives meeting in Dallas on Friday.
Gibson said most of the offshore investors looking to boost their U.S. real estate holdings are coming from Canada, Europe and the Middle East.
Increasingly these buyers are spreading out from the large East and West Coast markets to buy in other cities, including Houston and Dallas.
Commercial property investors are focused on locations with the best long-term growth prospects, Gibson told members of the Commercial Real Estate Women Network at the Omni Dallas Hotel.
“They are looking at markets with job and population growth,” he said. “And they are looking for the infrastructure that is going to support jobs and population growth.”
Dallas-Fort Worth and Houston are near the top of the list of the country’s fastest employment growth markets. All of Texas’ major markets are seeing huge population increases — due in part to migration of people and business from other states.
“There are more corporate headquarters moves happening in the U.S. now than we’ve seen ever,” Gibson said. “A stunning amount of corporate America is relocating out of California to other places.”
Gibson said HFF — one of the country’s largest commercial real estate investment banking and property marketing firms — is forecasting about $350 billion in commercial real estate investment in the U.S. this year.
That’s up about 30 percent from last year, but it’s still well below the record $570 billion in 2007.
Gibson said many of the commercial property problems created by the recession have been solved. “Distressed asset problems — that’s yesterday,” he said.
Most of the big bank lenders “have worked through all their [problem properties] for the most part,” Gibson said. “They are on offense instead of defense — they are deploying capital into real estate.”
Even with this year’s higher interest rates, investors are pumping billions into commercial property, Gibson said.
“They are very tired of volatility in the public securities market,” he said. “They think it’s been hijacked by traders.”
Gibson doesn’t see any of the commercial property pricing and construction excesses that were apparent before the recession.
“There is discipline in the market, which there wasn’t in 2007,” he said. “Commercial real estate supply is still modest.”
In fact, he said, “It’s the lowest percentage supply of commercial real estate as a percentage of GDP in U.S. history.”
http://www.dallasnews.com/business/commercial-real-estate/headlines/20131011-foreign-buyers-boost-commercial-real-estate-investment.ece
Dallas --(U.S. Dallas News)--
The commercial real estate market is quickly making up ground lost in the recession.
And so far higher interest rates haven’t rained on the parade of investors looking to take advantage of the market.
A surge in foreign investment in this county’s property markets is also underway.
“The amount of capital that is coming from foreign investors in the U.S. is going to accelerate pretty dramatically,” Mark Gibson, executive managing director of HFF LP, told real estate executives meeting in Dallas on Friday.
Gibson said most of the offshore investors looking to boost their U.S. real estate holdings are coming from Canada, Europe and the Middle East.
Increasingly these buyers are spreading out from the large East and West Coast markets to buy in other cities, including Houston and Dallas.
Commercial property investors are focused on locations with the best long-term growth prospects, Gibson told members of the Commercial Real Estate Women Network at the Omni Dallas Hotel.
“They are looking at markets with job and population growth,” he said. “And they are looking for the infrastructure that is going to support jobs and population growth.”
Dallas-Fort Worth and Houston are near the top of the list of the country’s fastest employment growth markets. All of Texas’ major markets are seeing huge population increases — due in part to migration of people and business from other states.
“There are more corporate headquarters moves happening in the U.S. now than we’ve seen ever,” Gibson said. “A stunning amount of corporate America is relocating out of California to other places.”
Gibson said HFF — one of the country’s largest commercial real estate investment banking and property marketing firms — is forecasting about $350 billion in commercial real estate investment in the U.S. this year.
That’s up about 30 percent from last year, but it’s still well below the record $570 billion in 2007.
Gibson said many of the commercial property problems created by the recession have been solved. “Distressed asset problems — that’s yesterday,” he said.
Most of the big bank lenders “have worked through all their [problem properties] for the most part,” Gibson said. “They are on offense instead of defense — they are deploying capital into real estate.”
Even with this year’s higher interest rates, investors are pumping billions into commercial property, Gibson said.
“They are very tired of volatility in the public securities market,” he said. “They think it’s been hijacked by traders.”
Gibson doesn’t see any of the commercial property pricing and construction excesses that were apparent before the recession.
“There is discipline in the market, which there wasn’t in 2007,” he said. “Commercial real estate supply is still modest.”
In fact, he said, “It’s the lowest percentage supply of commercial real estate as a percentage of GDP in U.S. history.”
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