Real estate investors are drawing back from Canada’s biggest city as high interest rates, construction costs and remote work take a deeper toll.
Commercial real estate investment in the Greater Toronto Area dropped 27 per cent in the second quarter of this year, down more than $2.5 billion from the year before, according to the latest report from CRE intelligence firm Altus Group.
The plight of office real estate since the pandemic is well known. In a recent report McKinsey Global Institute predicted that remote work could wipe US$800 billion from the value of office buildings in the world’s major cities.
Globally office attendance still is 30 per cent lower than what it was before the pandemic and McKinsey expects demand for office space to sink 13 per cent by the end of the decade.
The return-to-office has also stalled in Canada, said Altus.
The national office availability rate climbed to 18 per cent in the second quarter and hit 18.5 per cent in the GTA, the third highest in Canada after Calgary and Edmonton.
Sublet space rose to almost 25 per cent of the total available office space, up four per cent from the year before.
But interest rate hikes by the Bank of Canada, a shortage of skilled labour and rising construction costs are also taking a toll on residential investment, which fell 44 per cent from the year before.
“However, investors are optimistic as the constrained supply of rental housing and the high cost of housing in the market supports asset fundamentals,” Altus said.
The only sector that’s growing is industrial, where investment rose 36 per cent from last year to $3.39 billion.
“Rising interest rates and construction costs have not deterred investment and new supply as the GTA remains undersupplied relative to the demand,” said Altus.
But even this star is showing signs of strain.
Altus said investors are turning to the lower risks and stable returns of industrial real estate, but remain cautious as the availability rate rose to 2.3 per cent from 1.3 per cent the year before.
About three million square feet of new supply entered the GTA market in the second quarter of 2023, but unlike previous quarters a “significant portion” of it was not pre-leased, says the report.
Nor does Altus see a quick end to Toronto’s decline in real estate investment. The slowdown in the first half of 2023 is likely to continue for the rest of the year because of high interest rates and a growing gap between what sellers are asking and what buyers want to pay.
“Given the current difficulties in the office and some parts of the retail market, industrial and residential real estate will continue to be favoured asset classes in the GTA market.”
Those in political power along with equity market participants seem to think the war on inflation has already been won, but investing pro Martin Pelletier says it may be too soon to declare victory.
Betting one’s portfolio on an outright win over rising prices in the near term could be a dangerous proposition, so Pelletier offers ways to take out a bit of insurance in the event that the war on inflation drags on longer than many expect.
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NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.
The stock is now showing a 16.1% gain for the year after rising the past two days.
The Canadian Press. All rights reserved.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
The Canadian Press. All rights reserved.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
The Canadian Press. All rights reserved.
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