Real Estate

Emerging Trends 2013_Canadian version

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Strong consumer spending pushes the city's expected increase in 2012 gross domestic product slightly over 3.0 percent, increasing in 2013 to 4.0 percent. Employment growth has been continuous, as around 100,000 jobs have been created or filled since 2007. Unemployment forecasts predict a respectable 4.7 percent next year, but still 30 basis points below the ten-year average. With over 1.2 million residents, Edmonton continues to see population growth as many see the city as "the place to be." As Edmonton's energy-rich sector thrives, manufacturing follows with future expansion. Confidence in current and future oil prices provides a nice outlook for this oil-rich area. Say investors, "the world believes that oil is up for good," and "Edmonton is so small, and the oil industry finds it attractive." Emerging Trends survey results and real estate investors predict a good 2013 for Edmonton investment prospects: its rating value added 0.28 points, moving this market up two spots to second. Edmonton is an example that supports the trend to secondary markets in search of high-quality real estate investments in strong economic locations. "As a result of hard-to-purchase, quality 'A' proper- ties, we have more willingness to go to another market such as Edmonton, Saskatoon, and Regina." With this growth comes development, and Edmonton had a 0.87 increase in its rating value, moving to second from fourth. Non residential construction dominated, as projects like expansion of the Edmonton International Airport and Commonwealth Stadium's recreation center were completed. Housing starts statistics and survey results send mixed messages, as only a 1.1 percent increase in the number of new homes is forecast, but participants rank Edmonton as the number-one homebuilding area. Homebuilding prospects in Edmonton jumped three positions, and the city had the highest change in rating value of all nine markets. Regardless of the homebuilding outcome, Edmonton is a market on investors' radar. "Edmonton will outperform the others." Toronto (3). The number-one market to watch in the 2012 Emerging Trends report, Toronto delivered mixed results and responses for 2013. Overall, this international market is still a top-three city, and capital will continue to flow to the area. "Toronto was my choice. People are renting by choice, occupancy rate is always good, employment is stable." Forecasts support this statement, as job growth is expected to increase 3.0 percent, gross domestic product should gain 3.5 percent, and the city's educated workforce is expected to see its personal income grow another 3.6 percent. Lower interest rates and continued interest in high-quality assets drove residential and non residential construction higher over the past two to three years. Construction output in those sectors looks to be slightly lower this year, but government infrastructure support should continue to add value to the Toronto market. As is the case in other primary markets, high-quality assets are difficult to obtain, and prices still look likely to escalate. Foreign capital will continue to focus on Toronto's assets, but, an interviewee predicts, "Sovereign funds will come to Canada when Europe gets worse. And when they do, they will focus on Toronto." Survey results show Toronto taking steps back in all three categories this year. Investment prospect values fell 0.52 points to 6.18, and the city's rank went from first to third among the nine markets. Interestingly, the investment prospect value for 2013 is exactly equal to the Emerging Trends historical aver- age for Toronto. Even though Emerging Trends values are survey driven, this may be a sign that the Toronto market as a whole is in a state of equilibrium. Development is the only category where Toronto improved its prospects, but not enough to keep the second spot, and the city dropped to third. Still, many large projects are set for completion in 2012 and in the years to come. Building makes sense because "it's the Toronto international market; everything can be sold quickly." Homebuilding continues to be a hot topic, but survey results forecast a slowing in 2013, landing the market in fourth. Toronto's rising home prices continue to be a concern, as expressed by many interviewees. "The Toronto and Vancouver housing markets, especially condos, have come off a bit, but interest rates are low, and the Bank of Canada and the Canadian government have introduced some fear, but not panic." "Multifamily starts will slow, but vacancy rates will continue to decline, reaching 1.3 percent in 2013. Mixed use–style proper- ties, combining residential, commercial, and especially retail space, are a trend to watch for as additional properties are added to Toronto's inventory. The decline in apartment vacancy rates and need for additional units is seen in the buy, hold, sell results. The only buy recommendation is found in the apartment sector, where the largest share of interviewees—48 percent—will continue to look at multifamily investments. "Toronto equals 'oversupplied' in high- rise development, but 'undersupplied' in low rise." Hold suggestions dominate in the remaining four property types. Even though the largest share of participants

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