Canada’s quartet provides ‘major property investment potential’
04-22-2014
Canada's Quartet cities offer significant property investment opportunities, says JLL
Canada’s quartet provides ‘major property investment potential’
Toronto, Vancouver, Calgary and Montreal offer huge potential for international real estate investors and are set to grow larger, stronger and more dynamic over the next decade, says leading global consultant, JLL
Four Canadian cities are being tipped as having significant potential for international property investors and are set to secure their leadership roles on the world stage in five to ten years.
The Quartet Cities of Toronto, Vancouver, Calgary and Montreal offer major promise thanks to above average population growth, high global connectivity and liquid commercial real estate investment markets, says leading global real estate consultant, JLL, in its new report, The Canadian Quartet: Playing on the World Stage.
Brett Miller, President of JLL Canada, says, “The Quartet will offer significant opportunities for international investors as new waves of construction and of reinvestment in older stock help modernise these cities and as sustainable practices and new technologies are employed to make them smarter and greener.
“The shape and form of these cities is changing – whether by densification and the creation of a newly mixed-use core as in Calgary; a heavy focus on efficient and dense residential development in transit corridors as in Toronto; the impact of the green agenda on the built form as in Vancouver; or the creative influences in business and culture adding to the attraction of Montreal, multiple and significant opportunities are evolving.
“Converting these opportunities will take the kind of innovative developer and operator partnerships that Canadian capital is renowned for around the world. If focused on domestic markets, such partnerships will take these cities to the next stage of internationalisation.
“While the relative stability and safety for which these markets are recognized will endure, the next five to ten years will see a transformation of the Quartet into larger, stronger, more attractive and dynamic cities that will firmly secure their leadership positions on the world stage.”
“The next decade will see Canada’s Quartet offer international investors a compelling opportunity as their real estate markets expand. Not only are they among the most dynamic cities in the advanced world, they also possess the attributes that investors increasingly recognize as essential ingredients of city success with clear advantage in transparency, liveability, sustainability and innovation capabilities.
“We anticipate that over the next decade the Quartet cities will firmly secure their places on the world stage with all four cities regularly featuring among the world’s Top 30 real estate investment destinations. They will join an elite group of mid-sized cities that will leverage their skills base and their geographic and cultural advantages to create economic momentum that will ripple across all real estate sectors.”
Canadian cities and their real estate markets may have a reputation as being steady and lacking excitement, but a closer look at the Quartet’s urban attributes and their real estate fundamentals indicates not only healthy markets and liveability, but also increasingly positive long-term outlooks, says the report.
There is no doubt that the residential market will inevitably see a correction in house prices over the next five years, ultimately this adjustment is both necessary and healthy.
“In general, the sooner this process gets underway, the better. Gradually increasing interest rates will be an important catalyst, and will add to the multiple regulatory actions already in place. Over the next several years, Canada’s primary real estate markets will also become more affordable, provided that interest rate increases are not too dramatic,” the report says.
Strong real estate fundamentals and a stable macroeconomic environment make Canada an attractive proposition for foreign investors, but new approaches will be needed if they are to be successful.
The Canadian’s outbound approach has been to look for best-in-class partners; however we are yet to see those partners fully use the relationships they have established to gain access to opportunities in Canada.
Markets that possess a good mixture of domestic and foreign capital – tend to generate more opportunities for both domestic and cross-border investors. Foreign groups can also be an excellent source of new concepts, new tenants and global best-practice, says JLL.
The United States attracts a huge amount of Canadian capital and Canadian investors have poured more than US$20billion into US commercial property over the last 10 years, making them the most active foreign investor, with an average of 40% of all Canadian overseas investment flowing there.
“Over the last couple of years, Canadian capital has become even more important as a true market-mover in the United States; in 2013, Canadian investors purchased nearly one-third of all foreign investment there – more than the next four capital-source countries combined.”
Canadian property investors have also looked further afield into European and Australian property markets, as well as exploiting the emerging markets of Latin America – Rio de Janeiro, Sao Paulo, Bogota, Medellin and Santiago – have all seen Canadian investment recently.
Canadian investors have also established a presence in emerging markets in Asia Pacific and Africa through a number of investments in fund and indirect vehicles.
“This once again shows the pragmatic nature of Canadian offshore groups; where possible they will go direct and where not possible they will use the most efficient and effective ways of finding the property exposure they require. This has included PSP investing into China and Africa using indirect platforms, and CPPIB using funds to gain exposure in India.”
Entrepreneurs and start-ups will be attracted to the affordability and lifestyle offers in Montreal and Calgary in particular, while best practice in creating a green economy in Vancouver and the vibrancy and growing importance of financial services and technology in Toronto will help to enhance each city’s global appeal.
Eight other Canadian cities are also worth monitoring over the next decade. Edmonton, Alberta’s provincial capital and a major oil and gas centre, and Ottawa, the federal capital, stand out in terms of economic weight and commercial real estate activity.
Saskatoon and Regina have among the nation’s fastest growing populations and continue to outpace other Canadian cities by GDP growth. Research and technology sectors are driving forces in several cities, including Edmonton, Winnipeg, Ottawa, Hamilton and Quebec City, while Halifax is attracting outsourcing activity as one of Canada’s most competitive cities for doing business, the report adds.
By Adrian Bishop, Editor, OPP Connect