A surging second wave of COVID-19 tempered investment confidence in commercial real estate during the fourth quarter of 2020. Newly released results of the REALPAC/FPL Canadian Real Estate Sentiment Survey finds participating senior executives expressing slightly less optimism in market conditions than exhibited three months earlier. Notably, though, data was collected in October before the confirmation of approved vaccines.
In assessing both survey responses and accompanying insight from interviews with more than 50 influential Canadian players, analysts with FPL Advisory Group conclude that some indicators aren’t telling much of a story. In particular, the survey’s conventional focus on real estate asset pricing has shifted more to macro-level observations, but there are more details to report on access to capital.
“Transaction volume remains low, resulting in inconclusive asset valuations. Distressed transaction activity has yet to emerge in Canada,” the survey summary states. “Lenders remain active. There is an increased level of scrutiny during the due diligence process with many less willing to engage in higher risk investments. Equity capital is available; however, investors are increasingly discerning when evaluating investment track records and leverage ratios.”
Analysts also suggest “uncertainty” characterized the October snapshot, but that came with some perspective on a potential stabilizing force. “Many remain hopeful that a vaccine is imminent,” they advise.
Survey respondents — representing owners, asset managers and affiliated professional service providers in all property sectors — collectively nudged the overall index score down to 43 on a scale of 100. Confidence ebbed in both current and future market dynamics compared to the third quarter outlook.
Canadian executives were somewhat more positive about current conditions than were their U.S. counterparts — delivering an index score of 28 versus the U.S. consensus at 27. However, Canadian expectations for a future bounce-back were more modest — translating into an index score of 58 compared to the U.S. score of 61.
Nearly one-third of Canadian respondents deemed market conditions in the fourth quarter to be “much worse” than they had been 12 months earlier. That’s a significant jump from the 13 per cent expressing that view in Q3. Nevertheless, there was a small gain in respondents who perceived conditions were “much better”— climbing to 14 per cent from 10 per cent in Q3.
A larger share of respondents expected a longer-lasting downturn, with 27 per cent suggesting that market conditions will be somewhat or much worse by Q4 2021 compared to 23 per cent in Q3. Accordingly, fewer respondents foresaw “somewhat better” times ahead, with 47 per cent making that prognosis for 12 months in the future versus 51 per cent in Q3. A steady 18 per cent of respondents in both quarters predicted conditions would be about the same one year hence.
Despite the lack of transactions, 86 per cent of respondents pegged asset values at somewhat or much lower than they had been one year earlier. That’s an increase from 72 per cent expressing that view in Q3, which also encompasses a sizeable jump — from 6 to 24 per cent — in the quotient calling values much worse. Looking forward, 35 per cent of respondents expect asset values to drop further during the next 12 months, while 39 per cent of respondents expect “somewhat” improvement. That’s also more pessimistic than Q3.
The report’s selection of anonymous quotes from leading industry sources reiterate many common themes of 2020, including preference for industrial and multi-residential assets, the pandemic’s hard hit on already struggling retail assets and unease about tenants’ prolonged absences from office space. Those are consistent trends among lenders and equity investors, as industry sources note that wariness of office and retail assets is serving up competitive jockeying to lend on industrial and multi-residential assets. Alternative lenders are also forging more presence in the market.
Generally, respondents reported more hurdles to secure capital in Q4, with 69 per cent gauging it was somewhat or much more difficult to get debt financing and 67 per cent saying it was more difficult to obtain equity capital than it was in Q4 2019. Looking forward, 56 per cent anticipate that equity capital will be somewhat or much more abundant by Q4 2021, while 45 per cent expect lenders will be somewhat or much more amenable.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
