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Real estate's risks and opportunities ahead – Top1000funds.com

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As the demise of the office component in real estate allocations continues investors are favouring data centres, warehousing and low cost accommodation.

Office and bricks and mortar retail have suffered most at the hands of the pandemic. However, the pandemic-triggered impact on real estate from working from home and buying online varies across regions. For example, UK department stores and malls have been hit harder than their German counterpart, typically characterised by a grocery anchor.

Offices able to offer sought-after locations which help companies showcase their brand will thrive most. Moreover, offices in cities like Tokyo, where many employees’ preference is to come into work rather than work from home, will also thrive. In contrast, demand from office space in city’s like San Francisco, where most workers are now fully remote will stay weak. London offers opportunities for office investors. The pricing is much softer on a Brexit discount compared to other European capitals.

“The GFC offered an opportunity to get into London, now we are seeing the same thing,” said Tony Brown, global head of real estate at M&G Real Estate. Speaking at FIS Digital, he argued that investors should distinguish between offices that are magnetic and able to draw employees back with a better offering, from those that are mandatory.

It is important to view the current challenges in real estate in the context of the asset class’s evolution. For example, data centres and logistics overtook bricks and mortar retail a while back just as the listed equity giants of old like oil groups and big banks have also lost their crown.

“We haven’t been that positive on office for a while,” said Jon Cheigh, chief investment officer and head of real estate at Cohen & Steers, who estimates a fall in demand for office space of between -2 per cent to -10-15 per cent.

This was a sentiment echoed by fellow panellist Andrew Palmer, chief investment officer at Maryland State Retirement and Pension System. Overseeing a $7 billion allocation to real estate – $1 billion of which has been committed to managers over the last 12 months – he told delegates that the pension fund has been underweight office for while.

“It’s a difficult asset to release; it’s very expensive to make changes.”

Retail opportunities will shift to residential areas. Similarly, people are moving further away from their places of work, triggering a decentralisation in GDP and creating opportunities around major cities.

Maryland has structured a concentrated portfolio to core managers with allocations including storage and properties with lower price points like multi-family and workforce housing. Single family rentals and senior housing are also in the portfolio, and the allocation to industrials was recently ramped up.

However, investing in real estate alternatives like student accommodation or multi-family units requires investor patience and local knowledge.

“It’s difficult to invest in markets where you don’t have local experience,” said Palmer. “There are sectors we want to emphasise in the portfolio but we are not taking advantage of distressed assets; we are not sure they will return to peaks.”

Investors have flocked to warehousing and cloud computing facilities – both sectors that were initially found in the listed market. It’s behind the current trend of big money investors pivoting their sector composition and using the listed market to access real estate segments like large data centres and healthcare companies, said Cheigh.

“We are seeing investors selling billion dollar office buildings and shopping malls and deploying into self-storage facilities They are going from big assets to aggregate in a bunch of small assets.”

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Logistics low yield

Money has poured into logistics and yields are now notably lower. Although panellists noted some opportunities exist globally in logistics, appetite for logistics has waned.

Instead, investors should focus on healthcare, self-storage, data centres and towers and selective office and retail opportunities.

Real estate and infrastructure investors are often competing for the same assets with assets like data centres and cell towers crossing between the two buckets. It is a symptom of more money chasing fewer opportunities and investors becoming more active and flexible. It’s also a symptom or real estate’s evolution from just being viewed as “shiny” buildings, concluded Cheigh.

“Ultimately, investors want a physical asset with positive supply and demand trends. It doesn’t have to be shiny and beautiful.”

Sarah Rundell is a staff writer for Top1000funds.com based out of London. She writes on institutional investment across all asset classes, global trade and corporate treasury.

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Montreal real estate prices soar 21% amid lower listings, sales in November – Global News

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The Quebec Professional Association of Real Estate Brokers says November home sales and new listings fell in Montreal as prices soared by more than 20 per cent compared with a year ago.

The association says sales for the month totalled 4,402, a 17 per cent drop from 5,296 in November 2020.

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New listings amounted to 5,056, down 14 per cent from 5,848 last November.

The median price of a single-family home soared by 21 per cent compared with a year ago to reach $525,000, while condos went up by 18 per cent to hit $374,000 and plexes with two to five units had a 15 per cent spike pushing them to $725,000.

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Apart from condominiums, which saw a slight decline, the association says the median prices were also up from October 2021.

Charles Brant, the association’s director of market analysis, says he noticed a lack of supply and persistently high demand last month that placed pressure on prices and encouraged potential sellers to get into the market.

“The announcement of an earlier-than-expected rise in interest rates no doubt motivated potential sellers to advance their project in order to benefit from the sustained activity and the opportunity to sell at the best price,” he said in a statement.

© 2021 The Canadian Press

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Montreal real estate prices soar 21% amid lower listings in Nov.: brokers group – moosejawtoday.com

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MONTREAL — The Quebec Professional Association of Real Estate Brokers says November home sales and new listings fell in Montreal as prices soared by more than 20 per cent compared with a year ago.

The association says sales for the month totalled 4,402, a 17 per cent drop from 5,296 in November 2020.

New listings amounted to 5,056, down 14 per cent from 5,848 last November.

The median price of a single-family soared by 21 per cent compared with a year ago to reach $525,000, while condos went up by 18 per cent to hit $374,000 and plexes with two to five units had a 15 per cent spike pushing them to $725,000. 

Apart from condominiums, which saw a slight decline, the association says the median prices were also up from October 2021.

Charles Brant, the association’s director of market analysis, says he noticed a lack of supply and persistently high demand last month that placed pressure on prices and encouraged potential sellers to get into the market. 

“The announcement of an earlier-than-expected rise in interest rates no doubt motivated potential sellers to advance their project in order to benefit from the sustained activity and the opportunity to sell at the best price,” he said in a statement.

This report by The Canadian Press was first published Dec. 7, 2021.

The Canadian Press

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Ottawa home prices rose 19% year-over-year in November: real estate board – Globalnews.ca

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Ottawa housing prices continue to climb as 2021 draws to a close. It’s a trend real estate experts expect to continue in 2022.

The Ottawa Real Estate Board said that November’s average sale price for a condo was $432,099, while the typical residential-class home sold for $716,922. Both represented increases of 19 per cent over average sale prices in November 2020.

Though those figures represent significant jumps year-over-year, OREB President Debra Wright says that the month-to-month prices from October to November were relatively steady in the residential market and up seven percent for condos.


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“This is a far better situation than the monthly price escalations we had seen in the first quarter of 2021,” Wright said in a statement. “However, there is no question that supply constraints will continue to place upward pressure on prices until that is remedied.”

RE/MAX said in its 2022 Canadian housing market outlook last week that Ottawa average home price is expected to rise a further five per cent next year. That’s below estimates for other large markets in Ontario, such as Mississauga (14 per cent), Toronto (10 per cent) and Brampton (eight per cent).

In Ottawa as well as those other cities, RE/MAX said home prices could feel pressure as increased immigration levels further constrain supply levels.

Read more:

Canadian homebuyers facing weeks of move-in delays tied to supply chain snags

The OREB projects housing inventory in Ottawa is currently at a one-month supply, with the 1,430 units added to the market last month representing a 27 per cent drop from October and a 13 per cent decline from levels in November 2020.

While sales sit at “30 or so units over the five-year listing average, this is simply not sustainable and is taking us further away from the balanced market that will bring much-needed relief to potential buyers,” Wright said.

OREB members meanwhile sold 1,459 properties in November, a drop from the 1,605 seen in the same month last year. Sales figures were unseasonably high during this period in 2020, however, as more homes were sold in the fall because pandemic-driven lockdowns and general economic anxiety pushed demand from the usually busy spring and summer to later in the year.

November 2021’s sales volumes were still above the five-year average of 1,348 total units sold in November.

Realtors with the OREB have also gotten more involved with rentals in the past year, helping nearly 4,500 tenants find new units so far in 2021 compared with 3,120 such deals this time last year.


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Cost of housing biggest crisis outside the pandemic: Singh – Nov 28, 2021

© 2021 Global News, a division of Corus Entertainment Inc.

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