Real eState
RENX’s 2020 summer commercial real estate review | RENX
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A street-level view of the 87-storey tower proposed at Toronto’s downtown Bay and Bloor intersection. (Courtesy Herzog & de Meuron)
Labour Day has passed and fall looms. That means it’s time for us to play catch-up on the commercial real estate scene across Canada.
If you’ve been out of the office during the summer (we mean that in the figurative sense considering how many folks are working from home these days), and are wondering if you’ve missed any major Canadian commercial real estate news, then read on.
We present the 2020 version of RENX’s annual Summer Commercial Real Estate Review.
We’ve included a selection of the most-read and most significant stories written for RENX since June, followed by a few of the most insightful submissions from our Columnist Contributors.
As with previous summer reviews, these stories are not listed in order of importance, because depending on your sector(s) and market(s) of interest, what’s vital for one CRE professional to know might not be relevant to others.
So welcome back to work . . . and read on . . .
Dutch firms plan 87-storey downtown Toronto high-rise
Dutch developers Kroonenberg Groep and ProWinko are proposing an 87-storey, mixed-use high-rise which would tower over the downtown Toronto intersection of Bay and Bloor Streets. If approved and built as proposed, it would be Canada’s tallest building. Read the full story
WalMart plans new GTA warehouse, part of $3.5B investment
WalMart will build a fifth distribution centre in the GTA as part of a $3.5-billion commitment to its Canadian operations during the next five years. The centre will join another 300,000-square-foot facility under construction in Surrey, B.C.; and major upgrades to a third facility in Cornwall, Ont. Read the full story
ELAD Canada acquisition talks ‘progressing well’
Shortly after word of the sale of an interest in ELAD Canada to Plaza Partners and Argent Ventures became public, the CEO of ELAD Canada confirmed talks were “progressing well.” The transaction involves an initial payment of $225 million for 37 per cent of ELAD Canada as well as two U.S. properties. Read the full story
RioCan sells 50% interests in Toronto, Ottawa developments
RioCan REIT continued its trend of bringing in partners on major developments, selling 50 per cent interests in two of its residential-based projects to Maplelands Development Inc. (Dufferin Plaza in Toronto) and Killam Apartment REIT (Luma at Elmvale Acres in Ottawa). Read the full story
See also: RioCan continues to develop heavy slate of projects Read the full story
Dream launches $2.5B Calgary Alpine Park
Calgary’s ongoing economic challenges didn’t deter the construction launch of the massive $2.5-billion Alpine Park mixed-use development by Dream Unlimited. The 646-acre master-planned community will be home to about 10,000 residents, plus retail/commercial space, parks and amenities. Read the full story
498 housing construction projects delayed in GTA: BILD
A Building Industry and Land Development Association (BILD) survey found 498 residential construction projects by its members in the Greater Toronto Area had been delayed by the COVID-19 pandemic. In Toronto itself, 65 per cent of these projects were delayed three to six months and 32 per cent faced delays of greater than six months. Read the full story
Coquitlam plans dense, vibrant new downtown core
Coquitlam is embarking on a major urban planning mission that will take decades to realize: the transformation of 1970s suburban strip malls and parking lots into a rich, diverse and walkable urban core. Read the full story
Canderel buys Montreal office building, plans new build
Canderel purchased 6600 Saint-Urbain in Montreal from Olymbec in a move by the developer to expand its presence in the Mile-Ex neighbourhood, an increasingly popular hub for artificial intelligence firms. The developer also plans a 250,000- to 500,000-square-foot office development at 155 Beaubien Street West in Mile-Ex. Read the full story
Choice buys Toronto West Block, Weston Centre for $206M
Just a week after reiterating it was in the market for acquisitions, Choice Properties REIT (CHP-UN-T) said it would spend $206 million to acquire two Toronto mixed-use office and retail properties from Wittington Properties Ltd. Read the full story
Signet sells 7 Toronto apartment buildings to Starlight, Timbercreek
2050 Keele St., in Toronto is part of two apartment portfolios sold by Signet Group to Starlight and Timbercreek. (Google Street View)
Starlight and Timbercreek purchased seven Toronto apartment buildings from Signet Group for $193.7 million. The portfolios, which comprise 675 apartments located within the City of Toronto, range from a 187-apartment high-rise to an 18-apartment block. Read the full story
Rosefellow to build 3 Montreal, Ottawa-area industrial sites
Montreal developer Rosefellow and its financial partners will invest about $160 million to acquire and develop three industrial sites in Pointe-Claire in Montreal’s West Island; in Montréal-Est; and in Casselman, Ont., near Ottawa. Read the full story
Q2 2020 was RioCan’s ‘most unusual quarter’: Sonshine
Ed Sonshine called it “the most unusual quarter” of his 26 years as CEO of RioCan REIT. Q2 2020 will go down as one of the toughest financially for the trust, but both Sonshine and president/COO Jonathan Gitlin focused on restoring future value and growth during a financial results call with analysts. Read the full story
A sector-by-sector analysis of Canadian CRE: Altus
Accelerated evolution in all commercial real estate sectors, particularly in technology and work-from-home strategies, was a key theme as Altus Group offered a sector-by-sector breakdown on the impact of COVID-19. Read the full story
Office sublease market growing in Montreal, Toronto, Vancouver
The COVID-19 pandemic has led to an increase in sublease office space in major Canadian cities, particularly Vancouver and Toronto. Market experts expected the trend to continue and to expand to other cities as occupiers take stock of the coronavirus impact and future work habits. Read the full story
Rocky View County’s explosive growth continues
The recent announcement of a 1.23-million-square-foot Lowe’s Canada distribution centre in Balzac is the latest example of how the area just outside Calgary has become a magnet for huge commercial real estate developments and job growth. Read the full story
FROM OUR COLUMNISTS:
Can this many transit-oriented developers be wrong?
John Clark, Value, Weighed & Measured: Land values continue to rise. Real estate continues to sell. Developers continue to commit millions toward new developments where the emphasis is on intensification. Read the full column
Top-6 ways the workplace is changing post-COVID-19
David Bowden, CRE Matters: The “great work-from-home experiment” has resulted in changes and realizations. We have adjusted how, where and when we perform our duties. We have accelerated our adoption and use of technology. We might have shifted our views on how we would like to work and interact within our offices. Read the full column
If we want affordable housing, the numbers must work for everyone
Naama Blonder, Design, Policy and Canadian Cities: Earlier this summer, Toronto Mayor John Tory announced the locations for Housing Now’s Phase II sites. They are part of Toronto’s initiative to increase the supply of new affordable rental housing within mixed-income, transit-oriented communities on city-owned lands. Read the full column
Investors should be parking cash in industrial CRE
Barry Stuart, Saskatchewan Edge: In spite of the negative economic impact of COVID-19, the sale and lease activity within our existing industrial market continues. Saskatoon’s vacancy rate rose marginally by 0.12 per cent, to 5.86 per cent, according to ICR Commercial’s recent Q2 report. Read the full column
The proven way to accumulate wealth
Greg Placidi, CRE Wealth Insights: Amassing a fortune doesn’t typically happen overnight. Building wealth takes time. Sure, you can make a quick buck . . . but we all know Aesop’s old fable: slow and steady wins the race. Read the full column
Source:- Real Estate News EXchange
Real eState
Caution about Canada's private real estate sector abounds as valuations slow to adjust – The Globe and Mail
Valuations for Canada’s office real estate have taken longer to adjust than properties in other advanced economies.Jeff McIntosh/The Canadian Press
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As the U.S. economy has pulled meaningfully ahead of Canada’s, so too has its private commercial real estate sector, which is adjusting more positively to the post-pandemic reality.
That’s particularly evident in both countries’ privately held office property markets. While the U.S.’s is well down the path of transforming, demolishing or otherwise ridding itself of empty office space, Canada’s has practically frozen in place following a wave of markdowns in 2023. That has made valuation assessments next to impossible.
“There’s a big dichotomy, and the Canadian market so far has not corrected,” says Victor Kuntzevitsky, portfolio manager with Stonehaven Private Counsel at Wellington-Altus Private Counsel Inc. in Aurora, Ont., which holds private real estate assets in credit and equity vehicles in both Canada and the U.S.
It’s no secret that last year was a difficult period for owners of Canadian private real estate, with many pension fund managers losing money as high interest rates drove up borrowing costs, inflation increased operating costs and vacancy rates remained high or even climbed.
The Caisse de dépôt et placement du Québec saw its real estate portfolio decline 6.2 per cent in 2023. The Ontario Teachers’ Pension Plan experienced a 5.9-per-cent loss in its real estate book, while markdowns on commercial properties owned by the Ontario Municipal Employees Retirement System (OMERS) resulted in its real estate portfolio dropping by 7.2 per cent.
However, there are pockets of strength investors can look to, says Colin Lynch, managing director and head of alternative investments at TD Asset Management Inc. These include multi-family residential and open-air retail centres, as well as industrial properties, which have been steady performers following strong gains through the pandemic.
It’s a view that dovetails with other analyses of the Canadian market. BMO Global Asset Management’s latest commercial property outlook notes that the industrial and multi-family segments remain strong due to high investor demand and tight supply.
“Office remains the asset class of the greatest near-term concern and focus,” the BMO GAM report states, estimating “a timeline for a return to ‘normal’ of a least five years.”
Mr. Lynch says while that timeframe could be accurate, private real estate investors need to evaluate opportunities on a city-by-city basis.
“Every city is very different. In fact, the smaller the city, the better the office property market has generally performed because commute times are much better, so in-office presence is much higher,” he says.
He points to cities such as Winnipeg, Regina and Saskatoon, where commute times can be 10 minutes and office workers are in four days a week on average.
However, there’s also room for more bad news, with some property owners struggling to refinance expensive debt in a higher-for-longer rate environment that could force firesales for lower-quality buildings.
The U.S. and other advanced real estate markets, such as the U.K., are “quarters ahead” of where the Canadian office market is in terms of valuation adjustments, Mr. Lynch says. A major reason is much of Canada’s commercial office real estate is owned by a relatively small group of large investment funds.
“Peak to trough in the U.K., for example, declines were about 20 per cent,” he says, noting that Canada’s market hasn’t corrected to that extent, but it is catching up.
Mr. Kuntzevitsky says these private fund assets are valued based on activity.
“The U.S. market is deeper, there’s more activity within it compared to Canada,” he says. “The auditors I speak to who value these funds are saying, ‘Listen, if there’s no activity in the marketplace, we’re just making assumptions.’”
Nicolas Schulman, senior wealth advisor and portfolio manager with the Schulman Group Family Wealth Management at National Bank Financial Wealth Management in Montreal, holds private real estate funds for clients and says he’s preparing to evaluate new investments in the Canadian space later in 2024.
“We don’t think the recovery would take a full five-year window, but we do believe it’s going to take a bit more time. Our conviction is, we want to start looking at the sector toward the end of this year,” Mr. Schulman says.
Mr. Kuntzevitsky says he’s been allocating any excess cash to the U.S. market in both private and publicly listed vehicles.
“The opportunity here is that you redeem your open-ended private [real estate investment trusts (REITs) in Canada] and reallocate the money to the U.S., where the private market reflects [net asset values] based on recent activity, or you can invest in publicly listed REITs,” he says.
Still, Mr. Kuntzevitsky is watching developments closer to home for evidence the market is turning.
In February, the Canada Pension Plan Investment Board and Oxford Properties Group Inc. struck a deal to sell two downtown Vancouver office buildings for about $300-million to Germany’s Deka Group – about 14 per cent less than they were targeting.
“Hopefully, that will activate the market,” Mr. Kuntzevitsky says. “But so far, we haven’t seen that yet.”
For more from Globe Advisor, visit our homepage.
A large condo complex proposed in the increasingly condo-packed Yonge and Eglinton neighbourhood is planning to go much taller.
Developer Madison Group has filed plans to increase the height of its planned two-tower condo complex at 50 Eglinton Ave. W., from previously approved heights of 33 and 35 storeys, respectively, to a significantly taller plan calling for 46- and 58-storey towers.
The dual skyscrapers will rise from a podium featuring restored facades of a heritage-designed Toronto Hydro substation building.
As of 2024, plans for high-rise development at this site have been evolving for over a dozen years, first as two separate projects before being folded into one. The height sought for this site has almost doubled in the years since first proposed, and it shouldn’t come as a huge surprise for anyone tracking development in this part of the city.
Early 2024 design for 50 Eglinton West before current height increase request.
Building on a 2023 approval for towers of 33 and 35 storeys, the developer filed an updated application at the start of 2024 seeking a slight height increase to 35 and 37 storeys.
Only a few months later, the latest update submitted with city planners this April reflects the changing landscape in the surrounding midtown area, where tower heights and density allotments have skyrocketed in recent years in advance of the Eglinton Crosstown LRT.
April 2024 vision for 50 Eglinton Avenue West.
The current design from Audax Architecture is a vertical extrusion of the previous plan that maintains all details, including stepbacks and material details.
That updated design introduced in January responds to an agreement that allows the developer to incorporate office space replacement required under the neighbourhood plan to a nearby development site at 90-110 Eglinton East.
According to a letter filed with the City, “As a result of the removal of the on-site office replacement, which altered the design and size of the podium, and to improve the heritage preservation approach to the former Toronto Hydro substation building… Madison engaged Audax Architecture and Turner Fleischer Architects to reimagine the architectural style and expression of the project.”
A total of 1,206 condominium units are proposed in the current version of the plan, with over 98 per cent of the total floor space allocated to residential space. Of that total, 553 units are planned for the shorter west tower, with 653 in the taller east tower.
A sizeable retail component of over 1,300 square metres would animate the base of the complex at Duplex and Eglinton.
The complex would be served by a three-level underground parking garage housing 216 spots for residents and visitors. Most residents would be expected to make use of the Eglinton Line 1 and future Line 5 stations across the street to the southeast for longer-haul commutes.
Audax Architecture/Turner Fleischer Architects
Real estate is increasingly a tale of two markets — a luxury sector that is booming, and the rest of the market that continues to struggle with higher rates and low inventory.
Overall real estate sales fell 4% nationwide in the first quarter, according to Redfin. Yet, luxury real estate sales increased more than 2%, posting their best year-over-year gains in three years, according to Redfin.
Real estate experts and brokers chalk up the divergence to interest rates and supply. With mortgage rates now above 7% for a 30-year fixed loan, most homebuyers are finding prices out of reach. Affluent and wealthy buyers, however, are snapping up homes with cash, making them less vulnerable to high rates.
Nearly half of all luxury homes, defined by Redfin as homes in the top 5% of their metro area by value, were bought with all cash in the quarter, according to Redfin. That is the highest share in at least a decade. In Manhattan, all-cash deals hit a record 68% of all sales, according to Miller Samuel.
The flood of cash is also driving up prices at the top. Median luxury-home prices soared nearly 9% in the quarter, roughly twice the increase seen in the broader market, according to Redfin. The median price of luxury homes hit an all-time record of $1,225,000 during the period.
“People with the means to buy high-end homes are jumping in now because they feel confident prices will continue to rise,” said David Palmer, a Redfin agent in Seattle, where the median-priced luxury home sells for $2.7 million. “They’re ready to buy with more optimism and less apprehension.”
The luxury market is also benefiting from more supply of homes for sale. Since wealthy sellers are more likely to buy with cash, they are not as worried about trading out of a low-rate mortgage like most homeowners. That has freed up the upper end of listings, creating more inventory and driving more sales.
The number of luxury homes for sale jumped 13% in the first quarter, compared to a 3% decline for the rest of the housing market, according to Redfin. While overall luxury inventory remains “well below” pre-pandemic levels, the number of luxury listings that came online during the first quarter jumped 19%, the report said.
“Prices continue to increase for high-end homes, so homeowners feel it’s a good time to cash in on their equity,” Palmer said.
Still, not all luxury markets are booming, and the strongest price growth is in areas not typically known for luxury homes. According to Redfin, the market with the fastest luxury price growth was Providence, Rhode Island, with prices up 16%, followed by New Brunswick, New Jersey, where prices were up 15%. New York City saw the biggest price decline, down 10%.
When it comes to overall sales of luxury homes, Seattle posted the strongest growth of any metro area, with sales up 37%. Austin, Texas ranked second with sales up 26%, followed by San Francisco with a 24% increase.
Luxury homes sold the fastest in Seattle, with a median days on the market of nine days, followed by Oakland, California, and San Jose, California.
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