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Positivity Remains for Canadian Real Estate Executives
August 17, 2011
FPL Advisory Group and the Real Property Association of Canada (REALpac) have recently announced the findings from the Third Quarter 2011 REALpac/FPL Canadian Real Estate Sentiment Survey. The survey measures senior executives’ confidence in the Canadian commercial real estate industry and the Q3 2011 result captured the thoughts of 49 leading Canadian executives, including presidents, CEOs, board members, owners, asset managers, building operators and financial service providers. The survey respondents represent income producing real estate assets including retail shopping centres, industrial buildings, hotels, office buildings and apartment buildings.
The REALpac/FPL Canadian Real Estate Sentiment Survey measures the executives’ current and future outlook in three areas: overall real estate conditions; real estate asset values; and availability of capital.
TopLine Findings
The Sentiment Index measures the market trajectory and is scored from 0-100. Scores above 50 indicate positive trends and scores below 50 reflect negative trends. This quarter's index score reflects the moderation of expectations, dropping from 66 to 70. Nevertheless, it represents the eighth straight quarter where the index has scored above 50.
The Current index is recorded at 71 and the Future index is at 61, reflecting the participants’ expectations that the market will improve, although not at the same pace seen over the past year. The market is generally viewed as stable and attractive and the respondents are generally pleased with the Canadian real estate market’s current state.
Asset Prices
Real estate asset values have continued on an upward trajectory, with a broad group of respondents (87 per cent) reporting increased asset values over the past year. Nonetheless, 55 per cent are expecting flat pricing going forward and an increasing number (12 per cent) are anticipating a mild decline in asset values. One of the respondents said, “Asset prices have really moved up as cap rates have compressed. I can’t see things tightening up that much more though.”
Debt Markets
The availability of debt capital is seen a source of strength, and it has shown significant improvement in the last year. One participant mentioned. “…we’ve been able to get [the debt] we need. It’s definitely better than last year.” This debt capital strength leaves less room for future improvement, resulting in the majority of participants (57 per cent) expecting debt capital availability to remain the same in the coming year.
Equity Markets
The availability of equity capital is seen to be strong and positive, leaving little room for further advancement. Many participants have highlighted the healthy state of the Canadian market since the availability of equity has improved over the last year. One respondent mentioned, “Many of the people within our network are still seeing continued interest from the equity capital markets.” Again, around 53 per cent of Canadian respondents expect equity capital availability to remain about the same over the next year.
To download a copy of the report, click here - http://www.realpac.ca/canadian-real-estate-sentiment-survey/
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