Hot off the press Canadian commercial real estate continues to deliver double-digit performance. Here are three reasons to feel good (even as the Dutch kick our butt in Sochi).
1) Big total returns
Industry leaders packed the Glenn Gould Studio in Toronto yesterday as REALpac and IPD Canada rolled out the Quarterly Property Index. IPD executive director Simon Fairchild announced that the total return for the year ending Dec. 31 was 10.7%—underperforming public equities (13.6%) but outperforming bonds (-3.6%) and inflation (1.2%). The index measures 42 contributing portfolios and 2,318 assets valued at $117.6B. “Returns on direct real estate in Western Canada remained robust, mainly due to above average income and capital returns,” he says.
Snapped are Simon with CBRE director of research Ross Moore. Also on the panel were REALpac CEO Michael Brooks, CPPIB director of real estate investments Marco Ding, Standard Life Investments head of Canada real estate Blair McCreadie, and Allied Properties REIT CFO Peter Sweeney.
2) People love malls
In terms of property sectors, nationally, regional malls and super regional malls were the big drivers in getting to that 10.7% number—return was 14.2% for regional malls and 14.1% for the super-regional malls. While the overall 2013 return was below 2012’s 14.1%, the panelists agreed that Canadian real estate, over the long run, has produced a very healthy risk-adjusted return. By region, total return for Toronto was 10.5%; 11.0% in Vancouver.
3) Private capital ready to rock
Ross says that as REITs and institutional capital steps back, the level of private capital ready to fill the void is “enormous.” Meanwhile, CPPIB continued efforts to reposition its domestic portfolio, taking advantage of prices through the sale of select non-core holdings while pushing into foreign markets. Marco says they will continue to pursue Class-A commercial properties in Canada, but competition is fierce. “There are always half a dozen bidders at the table. We continue to like Canada as a market, but we are seeing more attractive opportunities elsewhere on a risk-adjusted basis.”
)
)
)
)
)
)
)
)
)
)
)
)