Real Property Association of Canada (REALPAC) and FPL Canadian Real Estate Sentiment Survey was performed in January 2019. The quarterly survey conducted by REALPAC indicates that confidence in CRE has improved.
REALPAC’s goal of the survey is not to predict the future, but to provide on the professional point of view from industry leaders. Unlike brokers who provide a good view of the past market conditions, REALPAC’s survey indicates how active CRE players view the current and future state of the market.
This is the 10th year the sentiment survey has been conducted. The survey for 2019 was conducted in mid-January of 2019. This is right after the principal markets took a nosedive in late 2018 and just before it improved at the start of the year. As a result, the survey results might not reflect the optimism that could have been shown if the survey was conducted later in the year.
Survey Findings
Canadians have more optimistic outlook for existing and future state of CRE. The outlook of the U.S. was the exact opposite and decreased in regards to both the current and future conditions of CRE.
Almost forty-five per cent of Canadian survey participants projected that conditions of the market would be close to the same while another twenty-seven per cent projected that the conditions would be better. That means about 72% of the market participates feel confident about Canadian CRE.
According to chief executive officer Michael Brooks, “It’s still business as usual”, as most sectors are noticing values are holding steady, with a slight increase in industrial and multi-family real estate. This makes Canadian CRE even more attractive as now is a great time to invest.
In Mr. Brooks viewpoint Canadian retail is still doing good, despite the rise in e-commerce. He states, “I’m sure there are still some impacts from e-commerce, but the people who have retail assets — particularly food-anchored ones — are doing fine. I think the malls are doing fine and are back-filling the Targets and the Sears of the world just fine.”
Availability of Debt Capital and Equity
As confidence continues to improve, so does access to capital. Debt Capital is more accessible today than it was a year ago due to a higher confidence in Canadian CRE. The survey showed those with confirmed track record has no trouble obtaining equity, while less-organized groups may find it more exigent this year.
One shortcoming with the recent survey is the level of optimism. Considering capital markets took a significant hit towards the end of 2018 before bouncing back at the start of this year. Being that the survey was performed in the middle of January, the results may not depict the optimism that may have existed if conducted towards the end of the quarter.
Overall, the availability of debt capital has resulted in a progressive economical lending market, particularly for high-quality commercial real estate.
Summary
The REALPAC FPL Sentiment Survey demonstrated not only is confidence stronger in Canadian CRE in general, but also retail remains a good investment. In particular malls and department stores are also displaying quality performance.
Furthermore, there is a large availability of debt capital and it is widely accessible, so this has produced a competitive and aggressive lending market.
Based on the survey, confidence is up, capital is availability and values are still steady. It’s a great time to conduct some due diligence and invest. Contact ReDev today to learn more about our Canadian Retail CRE opportunities.