CANADA – The Canadian real estate industry is still performing well, according to the 2018 Emerging Trends in Real Estate report recently published by PwC Canada and the Urban Land Institute (ULI).
Despite the industry’s steady performance, interviewees shared a concern of potential headwinds resulting in some real estate investors rebalancing their portfolios, and others taking a more defensive posture.
Affordability concerns remain a dominant theme for residential real estate in Toronto and Vancouver and the report discusses rapid development outside urban centres across the country. The report also finds that investors, developers and occupiers are rethinking how they approach their real estate investments, from ambitious intensification plans, to building communities, to investments outside major urban centres due to increased focus on new transit-centric hubs.
Commercial Real Estate:
According to the report, major pension funds, large institutional investors (including REITs), which already own the majority of Class A properties, given current pricing, are continuing to focus on developing new Class A properties. These new properties could fuse commercial, retail and service properties alongside residential developments building new urban communities.
E-commerce is forecast to grow to 8% in 2018 from 4.5% in 2013. This growth in e-commerce is having a profound effect on the retail sector and many interviewees believe retail investors need to rethink their overall retail strategy, through enhanced technology application and data analytics, as well as reinventing the retail experience. The growing penetration of e-commerce continues to push fulfillment and warehouses to the top of the list of investment and development prospects in 2018.
Housing affordability continues to be an issue and concern for some parts of the country. Higher prices (rental and ownership) are driving people to smaller cities in search of less costly housing options.
These new communities are developing as governments are increasing their investments in transit hubs connecting smaller cities and suburbs to urban centres. Some of the major Canadian transit investments currently underway include: the Eglinton Crosstown (Toronto), the Valley Line LRT (Edmonton) and the REM in Montreal.
The report also finds that more than one in three young adult Canadians, aged between 20–34, are living with at least one parent. Higher prices are spurring growth in multigenerational households in markets like Toronto and Vancouver. As a result, developers are now focusing on building larger condos, and adapting homes that can accommodate the various needs of this type of consumer.
The introduction of a foreign buyers’ tax to curtail foreign investment in British Columbia (August 2016) has had little impact on the market, as prices have rebounded to pre-tax levels. Respondents to the survey feel the same about Ontario’s strategy. In addition, there continues to be significant concern about the impact of expanded rent control legislation to the supply of rental apartments in Ontario.
Data Analytics and Technology:
Data and technology are significantly impacting the real estate industry for all stakeholders – consumers, investors and developers. According to the report, more than US$2.9B is projected to be invested in real estate technology globally. Some notable advances include consumers viewing properties using 3-D virtual tours, investors using data analytics to find better deals, and developers conceiving entire communities and parks based on new digital design technology.