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Emerging Trends in Real Estate 2017

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11 Emerging Trends in Real Estate ® 2017 Chapter 1: Emerging Trends in Canadian Real Estate What homebuyers are looking for may also be changing. In Calgary, real estate players have noticed that younger buyers in particular want quality rather than size, accepting smaller house footprints in exchange for higher-quality construction and fin- ishes. In Montreal, interest in townhouses and multilevel houses is rising; recent projects may in fact be aimed at foreign buyers. In Vancouver, the housing market has felt the first effect of the province's additional property transfer tax on foreign buyers. But over the long term, will the tax have the intended impact of stem- ming the influx of foreign investment and the soaring increase in house prices? That remains to be seen. Some believe that the measure will indeed curtail foreign activity while others feel that it will spark rising foreign investment in Toronto, Montreal, and, potentially, Calgary. Many respondents still predict that the tax will do little to stop wealthy buyers from investing when and where they please, especially if they are considering the prop- erty as a long-term investment. Dip or no, some observers have pointed out that Toronto's and Vancouver's prices are likely to remain high for the simple reason that there is not enough sup- ply to meet demand—and not enough supply being released by municipalities. Industrial The outlook for industrial property is largely positive. The ongo- ing growth of online shopping is driving demand for fulfillment centers, as retailers clamor for distribution centers with the high ceilings they need for modern logistics. The resurgence of Canada's manufacturing industry, after a difficult period of consolidation and retrenchment, is also creating new demand. Respondents said that manufacturers are expected to invest in new facilities—or retrofit existing ones—as they upgrade machinery and equipment and adopt more energy-efficient, sustainable building technologies. The other factor contributing to the upbeat projections for industrial property is the fact that an abundance of lending and investment funds is available—and readily accessible—owing to pent-up demand in the sector. Real Estate Investment Trusts "As long as you believe that interest rates are going to stay low, buy quality REIT units for growth and safety." The outlook for real estate investment trusts (REITs) is expected to be positive, although we may continue to see a shift in busi- ness models toward organic growth, intensifying portfolios, Exhibit 1-13 Real Estate Capital Market Balance Forecast, 2017 versus 2016 2016 2017 Oversupplied In balance Undersupplied Debt capital for acquisitions Debt capital for refinancing Debt capital for development/redevelopment 14% 62% 23% 11% 38% 52% 2016 2017 Oversupplied In balance Undersupplied Oversupplied In balance Undersupplied 17% 65% 20% 12% 48% 40% 2016 2017 38% 46% 16% 23% 52% 25% Source: Emerging Trends in Real Estate surveys. Note: Based on Canadian respondents only. Exhibit 1-14 Real Estate Capital Market Balance Forecast, 2017 versus 2016 Equity capital for investing 2016 2017 Oversupplied In balance Undersupplied 11% 31% 59% 6% 26% 68% Source: Emerging Trends in Real Estate surveys. Note: Based on Canadian respondents only.

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