05 May 2010

Canadian Investors Pay Premiums for 'Green' Buildings

Toronto Sun

Almost two-thirds of professional Canadian real estate investors are planning to add to their portfolios over the next 12 months and are willing to pay a premium for green buildings, a global survey of the commercial property market found.

The majority of investors, or 85%, favoured making acquisitions in Canada, with Toronto the preferred location, followed by Vancouver and Montreal, the Colliers International Global Sentiment Survey said.

Canadian investors were greener than their U.S. counterparts, with 50% saying they were prepared to pay a premium for sustainable buildings compared with just 30% of U.S. investors.

The survey polled 240 major institutional investors around the globe, with 26 in Canada. Their combined portfolios were worth more than $300 billion. Worldwide confidence in the commercial real estate market is also returning, with 64% of investors planning purchases in the coming year.

Most respondents said the commercial market hasn’t yet hit bottom, but are confident of a strong recovery starting later this year.

In Canada, the gap between what sellers expect for their property and what buyers are prepared to pay is likely to start to narrow towards the end of this year, helping transactions return to more normal levels.

About 54% of respondents said they were looking to sell off underperforming assets, though 42% of them were unwilling to dispose of properties at the bottom of the cycle.

“If there is a lesson to be learned from this recent recession it would be about the importance of proper assessment of investment opportunities in the context of market cycles,” said Milton Lamb, chair, national investment team, with Colliers International in Canada. “The commercial real estate market is not a stock market where one can enter and exit so easily, which means proper research and analysis become more important than ever."

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