(Image courtesy: Unsplash, Stock Photography)
Ask The Expert: Matthew Johnson
Q. What is the Life Sciences practice group?
A. Our Life Sciences Practice Group consists of approximately 70 real estate advisors across North America who bring specialized expertise in the Life Sciences sector, from technical requirements to the latest trends and innovations. I lead our Canadian practice, which services Life Sciences organizations, from start-ups to well-established, publicly-traded companies across all major cities in the country.
We focus on being partners to our clients first – the real estate is an outcome of the strategic consulting we do well in advance of securing them the right space.
Q. What differentiates Life Sciences facilities from general CRE spaces?
A. There are many specific, technical requirements that are unique to a Life Sciences premises and that can cost 3-4 times more than general office space. High ceilings, ventilation requirements, electrical systems, and plumbing are all technical factors that reduce the number of potential spaces within an already limited inventory of spaces.
Within the Toronto region, we are experiencing what is effectively a zero percent vacancy rate of wet lab inventory. There is a significant gap between supply and demand, which causes upward pressure on asking rental rates. This gap is also causing companies to compromise on their requirements, or potentially look at locations in established Life Sciences markets south of the border.
Q. How have technological advancements impacted the Life Sciences sector and its requirements for real estate?
A. Life Sciences companies require sophisticated properties and sophisticated owners who understand the complex needs of Life Sciences occupiers. We are involved with companies that operate within Artificial Intelligence, medical device development and manufacturing, and medical research – all with highly technical needs.
We have heard far too many stories of Life Sciences organizations not taking a specialized approach to their property search, only to leave their tours frustrated. We pride ourselves on understanding the intricacies of our clients’ work to ensure that all real estate options support their current and future needs. Simply put, the Life Sciences market and the real estate market are two very different things.
Q. Why is Toronto ideal for the Life Sciences sector?
A. Toronto is one of North America’s fastest-growing Life Science community. According to Toronto Global, there are more than 11,000 researchers and technicians working at 37 research institutes, 9 teaching hospitals and the University of Toronto’s Faculty of Medicine. The underlying foundation for success is here.
Toronto and its surrounding area are naturally establishing their own Life Sciences neighbourhoods. Consider the Meadowvale area, otherwise known as ‘Pill Hill,’ where significant laboratory, manufacturing, and warehousing operations of some of the world’s largest pharmaceutical companies are located. Then focus upon the Discovery District in downtown Toronto where important research is being conducted at the University of Toronto and Ryerson University, where many innovative firms within MaRS are starting their journey, and where surrounding hospitals are leading in innovative care. There are manufacturing hubs in the east, high-tech up Highway 404, and McMaster Innovation Park to the west that will house an ecosystem of innovative premises in excess of three million square feet. This is a landmark development not just in our region, but within North America.
Q. How does your experience in CRE benefit your clients?
A. Over the course of my 20+ year career at Colliers, I have focused on delivering an elevated level of service by partnering with my clients to solve their business problems through the lens of commercial real estate. My network, my team of specialized advisors, and our access to global opportunities help my clients accelerate their success.
Q. Why choose Colliers for Life Sciences?
A. It’s simple – we are fully committed to our clients’ success. To achieve that, we are on the ground and alongside the Life Sciences community and the developers of Life Sciences properties every day. We liaise with community stakeholders, individuals in government and economic development, while also consulting with leaders of research institutes, universities, and medical institutions. Our expertise is current, accurate and highly relevant. We leverage the Colliers’ global network, proven tools, resources, and experts across our service lines to provide a tailored approach to the needs of the Life Sciences sector.
Our network provides us with access to lab and life science premises that will never become publicly available. While not solving all demand issues, our access to off-market properties has allowed us to deliver success in situations where clients were convinced their growth plans would have to include a market outside of the Toronto region or even Canada.
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Banks Believe They Are Well-Prepared for Commercial Real Estate Fallout The Wall Street Journal
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Robert McLister: Tax shelters don’t make housing more affordable, but those with the cash would be foolish not to use them
Published Apr 19, 2024 • Last updated 55 minutes ago • 4 minute read
With housing unaffordability near its worst-ever level, our trusty leaders are on a quest to right their housing wrongs and get more young people into homes.
Part of Ottawa’s big strategy to “help” is promoting tax-sheltered savings accounts and pumping up their contribution limits. That, of course, stimulates real estate demand amidst Canada’s population and housing supply crises. But save that thought.
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First-time buyers now have three government piggy banks to stockpile cash for a down payment:
1. The 32-year-old RRSP Home Buyers’ Plan — which lets you deduct contributions from your income to defer taxes and then borrow from the account interest-free for your down payment (as long as you wait 90-plus days to withdraw any contributions);
2. The 15-year-old Tax-free Savings Account (TFSA) — which lets you save after-tax dollars, grow your money tax-free and withdraw it without the taxman taking a bite;
3. The one-year-old First Home Savings Account (FHSA) — which is a combination of an RRSP and TFSA. It lets you deduct contributions from income, compound it tax-free and never pay tax on withdrawals used to buy a home. You can even save the deduction for a year when you need it more — when you’re earning more money.
Assuming you have the funds and contribution room, these tax shelters can combine to help you amass a supersized down payment.
“Looking at the FHSA alone, with the max annual contribution room of $8,000 for 2023 and 2024, a potential first-time home buyer could have as much as $16,000 deposited in the account today for a down payment,” says Eric Larocque, chief mortgage operations officer at Questrade’s Community Trust Company.
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“If you also add in the cumulative contribution room of $95,000 for the TFSA, it amounts to $111,000 in potential funds available — and that’s before incorporating investment gains from either account.”
And it doesn’t stop there. RRSP, TFSA and FHSA savings limits keep increasing. If first-timers have enough contribution room, down payment savers in 2024 can sock away even more in these tax-sheltered troves.
“Factoring in the recent changes to the Home Buyers’ Plan, which now permits RRSP withdrawals of up to $60,000 — up from $35,000 — we land at a potential total of $171,000 in deposited funds that can be tapped for a first-time home buyer’s down payment,” Larocque adds.
That’s quite a wad — easily enough to cover the 20 per cent ($139,706) down payment required to avoid mandatory (and pricey) default insurance on the average home. Canada’s average abode is now worth $698,530 by the way, according to the Canadian Real Estate Association.
Here’s the rub: Canada’s living costs are sky-high, and real disposable income has trended downward. So, how’s an average first-time buyer household, raking in less than six figures, supposed to amass such a stash?
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Based on national averages, saving 10 per cent of one’s pre-tax income per year (who does that?) would take a young FTB couple over 15 years to sock away $140,000. History shows what would happen to home values if you waited 15 years — they’d jet off without you.
If you have no other resources and your bet is that historical appreciation rates continue — despite slower population growth, more building and potentially higher long-term rates — you’re better off saving less and buying sooner with a five per cent down insured mortgage.
So, does Big Brother really expect your typical first-time buyer to max out all these savings plans? Nope. But hey, throwing a buffet of options at you sure paints a pretty picture of government effort, doesn’t it?
Ottawa’s dirty little secret is that these nifty programs crank up demand, turning renters into buyers. So don’t bet on them making the home-owning dream any cheaper, for first-timers or anyone else.
Take advantage of them anyway.
The government sets limits on these tax shelters with well-off home buyers in mind. One lucky bunch who can make use of all three down payment savings plans is the first-timer with prosperous parents.
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Such buyers can make a withdrawal from their parental ATM (a living inheritance, some call it), deposit that cash in all three savings vehicles above and reap: hefty income tax savings or deferrals (thanks to the FHSA and RRSP deductions); tax-free/tax-deferred growth on the investments; and tax-free withdrawals if the money is used to buy a qualifying home (albeit, you’ll have to pay the RRSP HBP back over 15 years, starting five years after your withdrawal).
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The more opportunities it gives people to save for a down payment, the more Ottawa worsens the imbalance between purchase demand and supply. And that, of course, boosts real estate values skyward — which is dandy for existing owners but contradictory to the government’s affordability messaging.
But hey, these tax treats are ripe for the picking. Home shoppers with the means — especially those with deep-pocketed parents — might as well take advantage of all three accounts.
Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.
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Successful real estate investors have long followed the adage: When there is blood in the street, buy property.
Historically, this approach has yielded dividends, and it explains the mindset behind a new venture from Hines, a real estate giant with over $93 billion in assets under management. Hines recently announced a new platform called Hines Private Wealth Solutions that seeks to capitalize on the recent troubles in the real estate industry.
The management at Hines has been carefully watching the real estate industry for decades, and they believe that today’s market presents the perfect opportunity for investors to buy distressed assets and sell them at a profit in the future. When you consider that nearly $4 trillion in commercial real estate loans are set to mature between now and 2027, it’s easy to see the logic behind Hines Private Wealth Solutions.
The developers behind many of those projects took out loans assuming they would be able to refinance at pre-COVID interest rates. Considering that current interest rates are about double what they were before COVID-19, that assumption looks more like a losing bet every day. It also means there will be a lot of foreclosures that a well-positioned fund can snap up for pennies on the dollar.
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That’s where Hines Private Wealth Solutions seeks to step into the picture. It’s already contracted with investing heavyweight Paul Ferraro, former head of Carlyle Private Wealth Group, and raised $10 billion in funds for the new project. It will offer its clients a range of investment options, including:
In addition to these offerings, Hines will also give personal guidance to its investors on how to best manage their real estate assets. It is targeting investors who want to turn away from the traditional 60/40 investment model by channeling more money into real estate and away from other alternative investments. Hines is banking on the idea that high interest rates and high inflation will be around for a while.
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When that happens, it becomes more important for investors to hold inflation-resistant assets. That’s a big part of why Hines is betting that real estate is near the bottom after years of declining profits resulting from high interest rates and major losses in the commercial sector. Hines’s conclusion that now is the time to buy real estate is based on long-term company research showing that real estate typically declines after a 15- to 17-year-long growth period.
Its research shows that the decline normally lasts around two years, which is about the same length of time the real estate market has been suffering from high prices and high interest rates. Theoretically, that makes this the perfect time to make aggressive moves in the real estate market, and the Hines Private Wealth Fund was conceived to allow investors to take advantage of current market conditions.
Despite the deep troubles facing today’s real estate industry, it’s not hard to see the logic in Hines’s approach.
“This is a great vintage, it’s a great moment. This real estate correction began really over two years ago, right when the Fed started raising interest rates,” Hines global Chief Investment Officer David Steinbach told Fortune magazine. “So, we’re two years into a cycle, which means we’re near the end.”
If Hines is correct, real estate investors will have a lot of good bargains with high upside to choose from in the next 12 to 24 months. The good news is that even if you’re not wealthy enough to buy into the Hines Private Wealth Solution, there may still be plenty of opportunity for you to adopt their investment philosophy and start scouting for an undervalued, distressed asset to scoop up. Keep your eyes open and be ready.
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This article $93 Billion Real Estate Giant Is Betting The Market Is About To Hit Rock Bottom originally appeared on Benzinga.com
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