Canadians look abroad
Real estate brokerage Jones Lang LaSalle’s new Vancouver-based vice-president, capital markets says high asset prices and a lack of available product are sending investors – including Canada’s – overseas in search of investment opportunities.
“Canadian capital has been one of the top cross-border purchasers in the past two years,” said Lucy Fletcher, who heads Jones Lang LaSalle’s International Capital Group in Canada. “Everyone wants to get access to the real estate sector as they increase their allocations.”
Fletcher brings 14 years’ experience in the international real estate sector to her new position and a strong familiarity with Asia.
“Historically, there’s been a huge amount of Asian in-bound investment into this market,” she said, explaining Vancouver’s importance for her role with Jones Lang LaSalle. “It’s also an access point to the [U.S.] West Coast.”
But she pointed out that Asia is not currently among the top investors in Canada; Hong Kong, the leading point of origin for capital from Asia, ranks seventh behind the U.S., Saudi Arabia, the U.K. and countries in the Middle East and Scandinavia.
“The struggle here has been how tightly held the market’s been. There’s been a lack of product available for offshore purchasers.”
In addition, cap rates are extremely low and asset prices high.
The dilemma also confronts domestic investors, who Fletcher said have boosted real estate allocations to 13% and 14%.
Without sufficient opportunity in Canada, they’ve turned to the U.K., Germany and Scandinavia, deploying approximately $14.5 billion overseas in 2012, compared with investments of approximately $10 billion by foreign investors in Canada. In her new position, Fletcher will advise cross-border investors seeking opportunities within Canada and abroad.
Corporate housing health
A stronger – and better – picture is emerging of the corporate housing market in Vancouver, with the release of the latest report from the Indianapolis-based Corporate Housing Providers Association.
Prepared by Highland Group Hotel Investment Advisors Inc. of Atlanta, Georgia, the report indicates that occupancy and average daily room rates for corporate housing in Vancouver remained steady in 2012. This year, the stock of units will increase approximately 4.5% as improved fortunes add more units to the supply.
This is a welcome change from the period following the recession of 2009, when supply diminished and rates slumped (notwithstanding a boost from the 2010 Winter Olympics).
Over the past three years, average per-night rates have risen to $126 from $108, while occupancies are now solidly above 80%. Construction companies and software firms are the primary tenants, contracting for units in a market where owned accommodation can be pricey.
Vancouver now has approximately 1,215 corporate housing units, and that number could rise to 1,270 this year.
The number partly reflects a greater sample size; a year ago, the best estimate of the stock pegged the number of units at just 930.
Starts reflect caution
Developers ended 2012 expressing caution about 2013, and first quarter numbers from the Canada Mortgage and Housing Corp. indicate that the caution was justified. Housing starts totalled 1,971 units provincewide in March, buoyed by 1,624 in Vancouver. The total for the first three months of the year is 5,070, with close to 80% of the starts – in Vancouver.
But extrapolate those numbers out over the course of the year, and CMHC comes up with a figure of 24,396 starts (seasonally adjusted) if every month were like March.
This compared with CMHC’s forecast last fall of 29,100 starts for 2013. •
