05 May 2010

'Pause' is over for Commercial Real Estate in Calgary, Canada

Calgary Herald

Commercial real estate investors are returning to the Calgary market following a lull in transactions a year ago.

"It's a very different world today than it was a year ago," said Joe Binfet, managing director for Colliers International in Calgary.

"Last year there was a pause in the decision-making processes. Investors were looking for a bottom to the downturn. But right now we're seeing a lot of transactions and a lot of activity. There's a lot of capital available to both private and institutional investors and they're looking for quality product."

Binfet said there is strong demand for retail and industrial real estate properties, and land is also coming back into favour.

"Developers are showing interest which we haven't seen for quite some time," said Binfet. "We are encouraged. We have done more transactions (this year) than we did all of last year basically."

On Tuesday, Colliers International's 2010 Global Investor Sentiment Survey was released. It said Canadian real estate investors are cautiously optimistic that a fast recovery is on the horizon, even though the market has yet to reach its lowest point.

The report said 65 per cent of Canadian institutional and private real estate investors are considering acquisitions over the next 12 months, mirroring the global trend (64 per cent).

The global survey, of more than 244 major real estate investors (including 26 large Canadian institutional property investors) with a total investment portfolio of over $300 billion, also found a strong appetite for domestic investments.

The vast majority (85 per cent) of Canadian respondents who indicated acquisition plans intend to focus on the domestic market, especially Toronto (27.8 per cent), Vancouver and Montreal (16.7 per cent each), Edmonton and Calgary (14.8 per cent and 11.1 per cent respectively).

An improvement in economic fundamentals and an even larger improvement in the optimism and confidence of business people and investors is evident in the Calgary market, said Richard Pootmans, senior business development manager for real estate for Calgary Economic Development.

"Investors have taken their positions in our market and its potential," said Pootmans. "It is important to recognize that investors seek project-based opportunities and we know that as opportunities emerge in Calgary, that there will be investor interest."

The Colliers survey said a lack of appetite for foreign investments is reflected globally, with eight out of 10 respondents having no offshore portfolio or intentions to invest overseas.

"On a risk-adjusted basis, Canadian investors still see Canada as a preferred investment destination that offers a higher return on investment compared to the U.S., in part because of the turmoil that still lingers south of the border," said Milton Lamb, chair, national investment team, with Colliers International in Canada.

"Additional reasons respondents gave for focusing on domestic investments range from the quality of assets to diversification of income stream, availability of capital or better valuation matching income."

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