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Brexit, multifamily growth key issues for European CRE experts – Real Estate News EXchange

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Investors considering the European real estate market received insights from a panel of experts at the Global Property Market conference recently at the Metro Toronto Convention Centre.

Following are highlights of what the representatives from six companies, all active in European real estate investment, had to share with the audience.

M&G Real Estate

Panelists discuss European real estate investment opportunities and strategies at the Global Property Market conference in Toronto on Dec. 3, 2019. (Steve McLean RENX)

“U.S. investors tend to look for high risks and high returns when they go overseas,” said Tony Brown, global head of real estate for London, England-based asset owner and manager M&G Real Estate. “Japanese do the same. It depends on what part of the world you’re from what your attitude is toward international real estate.”

London is still the top city for real estate investment in Europe, but Brexit has had a negative impact.

Brown said there had been almost no overseas investment in London this year due to Brexit uncertainty, but he believes the city presents the “biggest single opportunity in Europe right now.”

The election of a majority Conservative government under Boris Johnson is likely to ease that uncertainty, adding to London’s appeal.

M&G’s focus is the United Kingdom and Europe is part of its international allocation. Brown said there are pockets of strong office rental growth in Europe because not much new space has been created in many CBDs during the past 10 years. In addition some older office buildings are being converted to hotels, or residential uses due to housing shortages in the U.K. and other major cities in continental Europe.

JLL EMEA

Matthew Richards, chief executive officer of capital markets for commercial property and investment management services provider JLL EMEA, said:

* there’s a “massive focus” on Germany due to capitalization rate compression;

* the story in Nordic countries remains positive, as there are opportunities in Stockholm, Sweden and rental growth remains very strong;

* and France is the “real darling of the market right now” due to macro-economic issues.

Richards said investment in student housing is more than US$10 billion in the United States, US$4 billion in the U.K. and US$1.5 billion in continental Europe. There’s accommodation for just 10 per cent of 19 million European university students, according to Richards, creating an area of opportunity.

Richards said investors looking for opportunistic returns in Europe are focused on development. Sustainability is also becoming more important in European real estate, and should be an investment consideration.

Canadian investors have a close community of people who’ve already invested in Europe. Richards said they should try and use those relationships to learn more about it.

Ivanhoe Cambridge

Ivanhoe Cambridgé head of Europe and Asia-Pacific Karim Habra said a common theme in gateway cities in Europe is a shortage of quality space, especially in the office sector.

“Whenever someone’s looking for class-A office space, the vacancy is almost zero. This is true for all of the cities. It’s true for Milan, Madrid, Berlin, Paris and every single city.”

Habra said Montreal-headquartered Ivanhoé Cambridge can invest and create value in different ways in Europe, including buying properties directly, setting up platforms and doing joint ventures.

“We wouldn’t do small investments if we didn’t see any growth. In some sectors you’re not going to find critical mass from Day One, so we bet on platforms with operating partners that we can help to grow in the future.”

Ivanhoé Cambridge invests in operating businesses as well as real estate in Europe.

“We will not buy stand-alone hotels because we don’t feel that they capture the full value,” said Habra. “So we go and buy the whole company. We buy the know-how, the rent, the people, the assets and the pipeline. In this way we capture the whole value-creation chain.”

Habra emphasized foreign investors must go into Europe with passion and conviction or they’re wasting their time in the competitive real estate market. He suggested focusing on fewer strategies and ensuring they have the right partners early in the process.

Habra’s final recommendation was to see Europe as a diversification play; and not compare returns and investment strategies with their home markets.

Apache Capital Partners

Apache Capital Partners co-founder and managing director Richard Jackson said Brexit concerns have left some potential investors sitting on the sidelines.

The London-headquartered private real estate investment management firm has multifamily, single-family and seniors living platforms. He said they’re supported by long-term demographic trends, and an increasing number of people are renting for affordability and lifestyle reasons. Jackson believes these defensive investments are recession-proof because people will always need a roof over their heads.

Apache has a pipeline of 6,000 multifamily units and is developing class-A-type products, which hasn’t previously been done in the U.K. Jackson said 14 million people rent housing in the U.K., and that will increase to 17 million by 2025.

Jackson noted just one per cent of residential rental properties in the U.K. are owned by institutions, although that is beginning to rise. Large-scale multifamily residential owners in the U.K. have a lot to learn from their counterparts in North America, where the sector is more established.

“We’ve set up our own operational platform where we’ve trained our own staff that come from a range of property backgrounds and hospitality backgrounds to try and instil that culture and genuine service,” said Jackson.

MARCOL

Rebekah Tobias is the head of business development for MARCOL, a family office that’s acted as an owner, operator, developer, asset manager and joint venture partner in the U.K. for 44 years. She said the firm, which has four European offices, has flexible capital without return criteria and doesn’t need to deploy funds within any set period of time, which allows it to be extremely selective.

“We can take a lot of risk on the operational side of the business, which is where we really find value and where we can create value. We’re not buying stabilized assets. That’s never really been a strategy of ours.”

Tobias said MARCOL didn’t sit back and wait for Brexit the situation to become more clear.

“We’ve seen yields in London that look incredibly cheap compared to the rest of Europe,” she said.

Tobias said multifamily residential is becoming a much bigger asset class in the U.K. MARCOL is also now backing a co-living platform, which bridges the gap between student housing and the multifamily residential market.

MARCOL is doing more in the healthcare real estate space to diversify its portfolio and realize growth opportunities. It’s backing a self-storage operator in Germany and building new sites in growth markets there.

“You just have to be able to roll your sleeves up and get your hands dirty with a lot of these platforms, and obviously back the right people to be able to deliver the strategy,” said Tobias. “If you have a unique skill set in a growing sector in the U.S., there’s a significant opportunity to bring that to Europe.

“But you have to be very mindful of the nuances and cultural changes and mentality, in particular as it relates to city, country and Europe as a whole.”

AXA IM – Real Assets

AXA IM – Real Assets provides investment capabilities in equity and debt, across different geographies and sectors, via private or listed instruments. It manages €15 billion in residential assets including student accommodations, multi-family residential and seniors housing in 11 countries.

Global head of research and strategy for real assets Justin Curlow said these defensive housing investments are underinvested in Europe. This “provides an attractive opportunity to build scale and build on the inefficiencies and build relationships with those standing operators, to really grow this sector into what we see is already a well-established sector in the U.S.”

European real estate investment is fragmented, less transparent than in North America, and difficult from regulatory and legal standpoints. That makes having a local presence, knowledge, and relationships all the more important, Curlow said.

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Adventures in real estate: How the pandemic is changing the way we live now – Toronto Life

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Upsize, downsize, flee to the country, live on a boat, buy an RV, get a farm, shack up with the in-laws, and other life-altering changes Torontonians are making in these crazy times

Photograph by George Pimentel

The smart money this pandemic year was on manufacturers of trampolines, pools and, yep, top-loading washers. Wherever you looked, the answer was sold out, check back later. Some enterprising types tried scalping above-ground pool kits. Stuck indoors in our sweatpants, we craved a jump, a dip and in-home laundry. Most of all, we craved space.

Despite the unemployed chefs and empty theatres and ghost-town corporate core, despite the iffy assurances that it’s okay to send your kids back to school, despite the seemingly permanent undercurrent of volatility making our daily lives so queasy—despite everything—home prices and sales just kept climbing. Weirdest of all, after a few soft months during the pandemic’s earliest stages, sales spiked. In August, there was a 20.1 per cent increase in the average house price compared to August of last year, and a 40.3 per cent jump in sales. Even the price of condos—you know, those super-dense glass towers where residents freak out about sharing elevators—won’t quit. By August, condo prices had climbed 9.5 per cent. So much for the theory that the only buyers were Airbnb speculators.

What’s going on? We offer a few theories. First is that our (fingers and toes crossed) success at flattening the curve and reopening parts of the economy means we’re good and ready to buy again. Then there’s the likelihood that we’ve all got calamity survivor syndrome, leaping into major life changes (getting married, getting pregnant, signing a mortgage) as a kind of promise ring for a brighter future.

The simplest answer: in a world where we measure personal safety in two-metre increments and spend our evenings sewing masks, a safe haven is our most valuable commodity. We’ve all become ruthless cost-benefit analysts of personal space. If you live in an apartment, this is the year to score a place with another bedroom to use as a home office. Or maybe you decided to buy—according to a survey this summer by Mortgage Professionals Canada, twice as many renters as in 2019 planned to purchase in the next year. If you live in a house, you want a bigger yard (for those trampolines and pools) or another storey so you can hide from the kids. Or maybe you’re feeling the urgency to give up on the city, sell your place in a bidding war (still happening!) and live out your fantasy of tending crops on an organic farm where your only neighbours are emus whose wool you weave into your own sack dresses (a July Ontario Real Estate Association survey found that 61 per cent of respondents wanted to move to the suburbs or countryside).

At the moment (but hopefully not for long), so much of what we take for granted about city living now falls into the category of unnecessary risk—belting out show tunes at karaoke, ditching work for Hanlan’s Point, navigating bustling sidewalks. No wonder everyone wants an escape, whether in an RV, a starter yacht or a cottage. (Prices increased in Muskoka by 15 per cent year over year between January and the end of May, and sales were up 73 per cent for the month of June.)

In the linked stories above, you’ll meet people who decided this was the year to take a leap and spring for that RV, buy that farm or put a down payment on that downtown condo. We might not have a vaccine (digits crossed on that one, too), but at least we’ve learned how to shelter in place in the best ways possible.


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Adventures in Real Estate: “I left Toronto, found the love of my life and bought 14 goats” – Toronto Life

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Adventures in Real Estate: “I left Toronto, found the love of my life and bought 14 goats”

Marli Seheult, 31

Operations coordinator at a downtown spa, now living in Arthur

In February, I met a guy online named Jeff who lives on a 72-acre hobby farm in Arthur, about 40 kilometres north of Guelph, with his parents. At the time, I was living in a two-bedroom apartment at Church and Adelaide with a roommate and my three dogs.

Jeff and I were talking a lot, and I could tell he was very family oriented, especially from the way he talked about his four-year-old son. I lived on a farm in Stratford as a young kid, and we bonded over our shared love of rural life.

I wanted to go and meet him, but I was really busy with work. Plus, I have three dogs, so how would I bring them up to Arthur for a date?  Then Covid happened. I told Jeff I’d put myself in a two-week quarantine and then go visit him in Arthur.

He’s got his own space there, a suite attached to the main house, so we had privacy. After three days of hanging out together, we both knew it was love. Three days turned into a month, which turned into two months. I was able to work remotely, and it felt irresponsible to be going back and forth to Toronto anyway. I kept saying, “Okay, I’ll go home next week,” but we kept pushing it back. Then, at the end of July, we drove to Toronto, packed up my stuff and I moved to the farm for good.

Jeff and his parents only recently got Internet (he didn’t know what Netflix was, which I found cute), so I’ve been showing them all about it. Jeff’s mom loves Kijiji—we just went crazy and bought 14 goats online.

I’m breeding for other breeders, not for meat, so my males will be sold for a high price—roughly $400 each.

We’re living in the in-law suite, and it’s nice and private. I’ve gotten to know Jeff’s four-year-old son, so in addition to becoming a goat breeder, I have a four-year-old best friend, too.

I call my partner’s parents my in-laws.

It was a pretty sudden transition, but I’m spontaneous by nature. There was some shock from some friends and family, but then they saw how in love we are and how excited I was about starting something with him.

I think we’re just at that age where we’re ready to settle down. Ours is a family farm, so eventually, when his parents get older, we’ll take over all the chores and duties. What started as a three-day date has turned into the rest of my life.

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The Winnipeg Real Estate Market Continues to Grow – RE/MAX News

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Could Winnipeg attract homebuyers from other major Canadian cities? Winnipeg has always been on the cusp of a major economic breakout. With the recent economic diversification initiatives of the past few years, the city has witnessed growth, but the path has been slow and long. Could the post-coronavirus economy speed up the momentum for this prairie city?

The Manitoba Real Estate Association (MREA) was blunt in its assessment that Winnipeg and the broader province have seen the housing market blossom in the aftermath of the COVID-19 public health crisis. MREA president Glen Tosh called it an “extraordinary rebound,” particularly after it seemed like residential sales would plummet for a lot longer than just the March-to-April period.

Although the city appears to be playing catch-up, the Winnipeg real estate market has generally had a good 2020. In fact, despite the pandemic, this year is shaping up to be better than in 2019.

“Overall, 2019 was a good year for residential sales in Manitoba, and considering the ongoing challenges of COVID-19, catching up to and surpassing last year’s totals at this time is quite an achievement,” said Tosh in a statement. “While there are more challenges to come in fighting the global pandemic, we believe owning a home in Manitoba can offer a safe haven in an uncertain world.”

So, what do the numbers say?

The Winnipeg Real Estate Market Continues to Grow

According to the Canadian Real Estate Association’s (CREA) Winnipeg REALTORS, Winnipeg recently enjoyed its best month on record. In August, sales surged 28 per cent from the same time a year ago and above the five-year average.

New listings failed to keep up with rising sales. Last month, 2,374 new listings were added to the Winnipeg real estate market, which is down one per cent from the same time a year ago. It is also down nine per cent from July. Overall, the present supply stands at 4,232 listings, down 30 per cent from last August, and the number of sales that account for the current inventory is 44 per cent.

Put simply, demand is ballooning, but there is a shortage of listings to match buyers. This has created a situation of bidding wars and multiple offers.

What may surprise some market observers is that there has been an incredible increase in the move-up market as Winnipeg households seek more space. In fact, the highest sale price ever occurred in August: $3.9 million.

“A work from home trend is changing the way one thinks about the kind and extent of space and has definitely garnered more thought and attention,” said Catherine Schellenberg, RE/MAX Professionals, president of WinnipegREALTORS®, in a news release. “This coupled with historically low mortgage rates are motivating factors for a number of sellers and buyers to make a change during this pandemic.”

Since there is plenty of uncertainty in the broader economy with the cold and flu season on the horizon, homebuyers and sellers are wondering if Winnipeg can maintain the upward trajectory in housing. The consensus appears to be a resounding “yes”.

Can Winnipeg Sustain the Momentum in the Fall?

The Canadian real estate market is expected to benefit from ultra-low borrowing costs. Rates are at historical lows, and they could remain this way for several more years. The Bank of Canada (BoC) has all but confirmed that low interest rates are here to stay for a few more years. As part of the central bank’s efforts to cushion the economic blow from the virus outbreak, rates across-the-board will remain lower for longer. The five-year benchmark mortgage rate, for example, was lowered to below five per cent.

When borrowing is this low, it allows homebuyers to consider other options, like relocating to another city or upgrading their residences. Winnipeg could see an inflow of capital over the next couple of years, particularly as more people become concerned over hyperdense urban centres. The same trend is playing out in other Canadian urban markets like Halifax, which is in the beginning stages of a population boom and a capital influx.

Winnipeg is still recovering from the coronavirus-induced economic downturn, and its housing sector will play a role in its recovery. As pent-up demand and low inventory levels impact the real estate market, you can anticipate that prices will sustain their upward trajectory. According to the RE/MAX Winnipeg Housing Market Outlook (Fall 2020), real estate prices are forecast to rise two per cent for all property types for the remainder of 2020.

What better way to emerge from an unprecedented public heath crisis than seeing housing valuations climb! The future looks promising for this dynamic prairie city.

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