Panelists at the MSCI/REALPAC Canada Annual Property Index event in Toronto, from left: moderator Michael Brooks of REALPAC, managing director and portfolio manager Christine Iacoucci of BentallGreenOak, CFO Teresa Neto of Granite REIT, and CBRE executive vice-president and managing director Jon Ramscar. (Steve McLean RENX)
The industrial real estate sector’s 2019 rate of total return far outpaced any other on the MSCI/REALPAC Canada Annual Property Index, and it’s looking good in 2020 – largely due to the continuing impact of e-commerce.
Teresa Neto, chief financial officer for Toronto-headquartered Granite REIT (GRT-UN-T), was part of a recent wide-ranging panel discussion at the Toronto Region Board of Trade after the index results were released.
She said online sales accounted for just 4.4 per cent of total Canadian retail sales in November of 2019. That compares to 11.2 per cent in the United States in Q3 2019 and 15 to 20 per cent of retail sales in some European and Asian countries.
“We still have a tremendous amount of runway in Canada on e-commerce.
“That’s going to continue to drive logistics, e-commerce and warehousing, not to mention the population growth we’re experiencing in our major cities in Canada. We’re bringing in 320,000 to 340,000 immigrants every year.”
Industrial rents exploded in 2019
Christina Iacoucci, managing director and portfolio manager for BentallGreenOak, said industrial rents “just exploded” in 2019.
For example, Neto said Toronto experienced 20 per cent growth in industrial rents. That helped widen the total return spread between industrial and residential, the second-best performing sector on the index.
“On the residential side, rents have grown as well, but there’s going to be a cap on what people can pay for rent versus home ownership,” said Iacoucci. “The other thing that’s slowing down on the residential side is that there’s a lot of demand, pressure and movement on new build.
“Construction costs have gone through the roof and really slowed down the development of new purpose-built rentals.”
Neto pointed out rent represents just five per cent of costs for logistics companies, while transportation accounts for 30 to 40 per cent.
By reducing transportation costs two per cent, she said tenants can accommodate large rent increases without suffering too much.
Industrial development is a challenge
While there’s plenty of desire for more industrial development, and Neto said e-commerce is driving 30 to 40 per cent of it, it’s a challenge in Vancouver and Toronto due to a lack of available land. Rents also have to be in the $10- to $12-per-square-foot range to get a five per cent return in those cities, she added.
This has led to companies seeking infill properties to redevelop into modern industrial assets. Scarce land availability has also led Granite to do most of its recent development in the U.S. and Germany.
Neto believes cold storage for groceries and pharmaceutical products will be the next wave of e-commerce and warehousing growth.
She said food delivery leaders in the Netherlands and Germany are starting to do interesting things with artificial intelligence and she believes that will move into Canada as well.
Repositioning underperforming retail sites
Iacoucci said some underperforming retail sites could be converted to last-mile delivery light industrial properties, and they might even be able to get higher rents.
“I don’t think every site is right for residential, but there is a huge demand for last-mile delivery. It’s difficult to find sites large enough to have these distribution centres.”
CBRE executive vice-president and managing director Jon Ramscar acknowledged the repositioning of retail sites with mixed-use redevelopment in major markets.
However, he said such moves have less potential in secondary and tertiary markets, where retail is often performing worse.
The retail sector is pulling back because a lot of money previously invested there is now going to industrial, Ramscar added.
Co-working is here to stay
On the office front, Ramscar said co-working spaces are here to stay.
While WeWork was burning through cash at an unsustainable rate before a restructuring which began late last year, Ramscar said there are other companies operating in the space and CBRE is working with many them due to the demand.
Ramscar said downtown Toronto has the lowest office vacancy rate in North America and new construction is 80 per cent pre-leased. Since there aren’t a lot of available office space options, co-working sites can fill gaps and provide a valuable service.
Large fund managers are going global
Panel moderator and REALPAC chief executive officer Michael Brooks asked about the recent trend of large fund managers going global and diversifying.
Toronto-based Sun Life Financial Inc. (SLF-T) merged Bentall Kennedy, the North American real estate and property management firm it acquired in 2015, with global real estate investment firm GreenOak Real Estate last year to create BentallGreenOak.
The company now manages about $63 billion in office, industrial, retail and multiresidential assets for about 750 institutional clients.
Iacoucci said these moves were made by Sun Life in response to the desires of institutional investors.
They’re becoming more interested in real estate because it provides better returns than bonds, equities and debt, and they’re looking for further portfolio diversification.
“If you look within Canada, there are only so many locations and asset types that you want to invest in,” said Iacoucci. “We needed to have a much larger reach for our clients.
“I think a lot of companies like ourselves are seeing this as a competitive advantage to be able to deliver these global diversification plays.”
Foreign investment in Canada
Brooks said five of the top 10 biggest global real estate investors are Canadian. He asked about foreign real estate investment coming into Canada.
Ramscar said 70 per cent of the foreign investment in Canadian real estate in 2016 was Chinese and last year 70 per cent of it was German.
He noted Canada remains a safe haven for investment and is becoming a larger tech player, so the foreign appetite for Canadian real estate remains strong in Toronto and Vancouver and is growing in Montreal.
Environmental, social and governance
While pension funds and major institutional investors have been dealing with environmental, social and governance (ESG) concerns and reporting for years, public companies are now making it a bigger priority.
“In the last 12 months I’ve seen a massive shift, where our investors are demanding more and more information on ESG,” Neto said of Granite REIT, which has a $3.9-billion market cap and $4.5 billion of assets under management in North America and seven European countries.
“It’s challenging as an industrial REIT because most of our leases are very much triple-net and tenants manage most of their energy use.”
Neto said global automobile parts supply company Magna International, which is Granite’s largest tenant and represents 40 per cent of its revenue, won’t share information. However, it does produce its own ESG report.
Granite is asking tenants for ESG information, gathering as much as possible, and will report on what it has while also committing capital to its own ESG programs.
“When pension funds started reporting ESG, the industrial portfolios were left out,” said Neto.
“If we’re not ready to communicate to our investors about ESG, it’s going to be a problem for us and we’re going to limit our access to capital. That’s a bad thing for our returns.”
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
MONTREAL – The Quebec Professional Association of Real Estate Brokers says Montreal-area home sales rose 9.3 per cent in August compared with the same month last year, with levels slightly higher than the historical average for this time of year.
The association says home sales in the region totalled 2,991 for the month, up from 2,737 in August 2023.
The median price for all housing types was up year-over-year, led by a six per cent increase for the price of a plex at $763,000 last month.
The median price for a single-family home rose 5.2 per cent to $590,000 and the median price for a condominium rose 4.4 per cent to $407,100.
QPAREB market analysis director Charles Brant says the strength of the Montreal resale market contrasts with declines in many other Canadian cities struggling with higher levels of household debt, lower savings and diminishing purchasing power.
Active listings for August jumped 18 per cent compared with a year earlier to 17,200, while new listings rose 1.7 per cent to 4,840.
This report by The Canadian Press was first published Sept. 6, 2024.
In the quest to find cities where renters can enjoy the best of all worlds, a recent study analyzed 24 metrics across three key categories—Housing & Economy, Quality of Life, and Community. The study ranked the 100 largest cities in Canada to determine which ones offer the most to their renters.
Here are the top 10 cities that emerged as the best for renters in 2024:
St. John’s, NL
St. John’s, Newfoundland and Labrador, stand out as the top city for renters in Canada for 2024. Known for its vibrant cultural scene, stunning natural beauty, and welcoming community, St. John’s offers an exceptional quality of life. The city boasts affordable housing, a robust economy, and low unemployment rates, making it an attractive option for those seeking a balanced and enriching living experience. Its rich history, picturesque harbour, and dynamic arts scene further enhance its appeal, ensuring that renters can enjoy both comfort and excitement in this charming coastal city.
Sherbrooke, QC
Sherbrooke, Quebec, emerges as a leading city for renters in Canada for 2024, offering a blend of affordability and quality of life. Nestled in the heart of the Eastern Townships, Sherbrooke is known for its picturesque landscapes, vibrant cultural scene, and strong community spirit. The city provides affordable rental options, low living costs, and a thriving local economy, making it an ideal destination for those seeking both comfort and economic stability. With its rich history, numerous parks, and dynamic arts and education sectors, Sherbrooke presents an inviting environment for renters looking for a well-rounded lifestyle.
Québec City, QC
Québec City, the capital of Quebec, stands out as a premier destination for renters in Canada for 2024. Known for its rich history, stunning architecture, and vibrant cultural heritage, this city offers an exceptional quality of life. Renters benefit from affordable housing, excellent public services, and a robust economy. The city’s charming streets, historic sites, and diverse culinary scene provide a unique living experience. With top-notch education institutions, numerous parks, and a strong sense of community, Québec City is an ideal choice for those seeking a dynamic and fulfilling lifestyle.
Trois-Rivières, QC
Trois-Rivières, nestled between Montreal and Quebec City, emerges as a top choice for renters in Canada. This historic city, known for its picturesque riverside views and rich cultural scene, offers an appealing blend of affordability and quality of life. Renters in Trois-Rivières enjoy reasonable housing costs, a low unemployment rate, and a vibrant community atmosphere. The city’s well-preserved historic sites, bustling arts community, and excellent educational institutions make it an attractive destination for those seeking a balanced and enriching lifestyle.
Saguenay, QC
Saguenay, located in the stunning Saguenay–Lac-Saint-Jean region of Quebec, is a prime destination for renters seeking affordable living amidst breathtaking natural beauty. Known for its picturesque fjords and vibrant cultural scene, Saguenay offers residents a high quality of life with lower housing costs compared to major urban centers. The city boasts a strong sense of community, excellent recreational opportunities, and a growing economy. For those looking to combine affordability with a rich cultural and natural environment, Saguenay stands out as an ideal choice.
Granby, QC
Granby, nestled in the heart of Quebec’s Eastern Townships, offers renters a delightful blend of small-town charm and ample opportunities. Known for its beautiful parks, vibrant cultural scene, and family-friendly environment, Granby provides an exceptional quality of life. The city’s affordable housing market and strong sense of community make it an attractive option for those seeking a peaceful yet dynamic place to live. With its renowned zoo, bustling downtown, and numerous outdoor activities, Granby is a hidden gem that caters to a diverse range of lifestyles.
Fredericton, NB
Fredericton, the capital city of New Brunswick, offers renters a harmonious blend of historical charm and modern amenities. Known for its vibrant arts scene, beautiful riverfront, and welcoming community, Fredericton provides an excellent quality of life. The city boasts affordable housing options, scenic parks, and a strong educational presence with institutions like the University of New Brunswick. Its rich cultural heritage, coupled with a thriving local economy, makes Fredericton an attractive destination for those seeking a balanced and fulfilling lifestyle.
Saint John, NB
Saint John, New Brunswick’s largest city, is a coastal gem known for its stunning waterfront and rich heritage. Nestled on the Bay of Fundy, it offers renters an affordable cost of living with a unique blend of historic architecture and modern conveniences. The city’s vibrant uptown area is bustling with shops, restaurants, and cultural attractions, while its scenic parks and outdoor spaces provide ample opportunities for recreation. Saint John’s strong sense of community and economic growth make it an inviting place for those looking to enjoy both urban and natural beauty.
Saint-Hyacinthe, QC
Saint-Hyacinthe, located in the Montérégie region of Quebec, is a vibrant city known for its strong agricultural roots and innovative spirit. Often referred to as the “Agricultural Technopolis,” it is home to numerous research centers and educational institutions. Renters in Saint-Hyacinthe benefit from a high quality of life with access to excellent local amenities, including parks, cultural events, and a thriving local food scene. The city’s affordable housing and close-knit community atmosphere make it an attractive option for those seeking a balanced and enriching lifestyle.
Lévis, QC
Lévis, located on the southern shore of the St. Lawrence River across from Quebec City, offers a unique blend of historical charm and modern conveniences. Known for its picturesque views and well-preserved heritage sites, Lévis is a city where history meets contemporary living. Residents enjoy a high quality of life with excellent public services, green spaces, and cultural activities. The city’s affordable housing options and strong sense of community make it a desirable place for renters looking for both tranquility and easy access to urban amenities.
This category looked at factors such as average rent, housing costs, rental availability, and unemployment rates. Québec stood out with 10 cities ranking at the top, demonstrating strong economic stability and affordable housing options, which are critical for renters looking for cost-effective living conditions.
Québec again led the pack in this category, with five cities in the top 10. Ontario followed closely with three cities. British Columbia excelled in walkability, with four cities achieving the highest walk scores, while Caledon topped the list for its extensive green spaces. These factors contribute significantly to the overall quality of life, making these cities attractive for renters.
Victoria, BC, emerged as the leader in this category due to its rich array of restaurants, museums, and educational institutions, offering a vibrant community life. St. John’s, NL, and Vancouver, BC, also ranked highly. Québec City, QC, and Lévis, QC, scored the highest in life satisfaction, reflecting a strong sense of community and well-being. Additionally, Saskatoon, SK, and Oshawa, ON, were noted for having residents with lower stress levels.
For a comprehensive view of the rankings and detailed interactive visuals, you can visit the full study by Point2Homes.
While no city can provide a perfect living experience for every renter, the cities highlighted in this study come remarkably close by excelling in key areas such as housing affordability, quality of life, and community engagement. These findings offer valuable insights for renters seeking the best places to live in Canada in 2024.
