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| Mark E. Rose |
Toronto, Ontario, CANADA —
The commercial real estate industry ended 2016 as it began – with low interest
rates, low cap rates and moderate GDP growth in most nations – but it does not
feel like the same environment heading into 2017.
Rising protectionism and
political unrest have introduced a healthy dose of fear and skepticism as to
where we are in the current market cycle and what comes next.
Despite job growth,
improving market fundamentals and superior yields to alternative investments,
commercial real estate owners, occupiers and investors disagree about how long
this cycle could – and should – continue. It is the seventh inning, but how
long is this ball game?
These are some of the key
trends noted in Avison Young’s 2017 North America, U.K. and Germany Forecast,
released this week.
The annual report covers
the office, retail, industrial and investment sectors in 63 markets in five
countries on two continents: Calgary, Edmonton, Halifax, Lethbridge, Montreal,
Ottawa, Quebec City, Regina, Toronto, Vancouver, Waterloo Region, Winnipeg, Atlanta,
Austin, Boston, Charleston, Charlotte, Chicago, Cleveland, Columbus, OH;
Dallas, Denver, Detroit, Fairfield County, Fort Lauderdale, Greenville,
Hartford, Houston, Indianapolis, Jacksonville, Las Vegas, Long Island, Los
Angeles, Miami, Minneapolis, Nashville, New Jersey, New York, Oakland, Orange
County, Orlando, Philadelphia, Phoenix, Pittsburgh, Raleigh-Durham, Reno,
Sacramento, San Antonio, San Diego, San Francisco, San Mateo, St. Louis, Tampa,
Washington, DC; West Palm Beach, Mexico City, Coventry, London, U.K.; Berlin,
Duesseldorf, Frankfurt, Hamburg and Munich.
“Take me out to the ball
game! It is only fitting that, in a year full of upsets, the Chicago Cubs
celebrated their first World Series win in 108 years. The nine innings of
American baseball have become a metaphor for the global real estate market
cycle, but given the many variables of the current climate, just like the World
Series finale, this cycle may be going into overtime,” comments Mark E. Rose, Chair and CEO of Avison
Young.
“Will we see 2016 redux,
or changes ahead? Pundits have taken both sides of the interest rate debate,
from low rates indefinitely to a gradual return to historical levels.
“Meanwhile, virtually all
developed countries piled on additional debt, ensuring that no government would
lead the charge to raise rates. Economists disagree about how best to proceed,
but a majority of business executives understand that we need to normalize
rates one day – and sooner rather than later. It is hard to conceive a climate
with less consensus.”
Rose continues: “Buyers
and sellers used Brexit and the U.S. presidential election to pause and gather
data points. Decision-making might have slowed in 2016, but the appetite for
investment in real estate continues unabated.
“The overarching themes of
global financial growth from a depressed base and global population topping 10
billion in the next few decades provide strong support for everything related
to real estate.
“Technology is a
game-changer, potentially impacting what, where and how properties get used and
constructed. If history is a guide, technology – like immigration – has
redistributive impacts but can create meaningful positive economic growth for
decades to come.”
To make the case for the
cycle being in extra innings, Rose pivots back to the baseball analogy.
“The widely held opinion
is that real estate is in the seventh inning,” he says. “At Avison Young, we
disagree. We see something very different. We might be in the seventh or eighth
inning from a pricing perspective, but given the market forces and attributes
that currently exist, we could be in the seventh inning of a very long
extra-innings game for our industry.
“Real estate is a
legitimate investment alternative and is currently producing higher yields than
stocks and bonds.”
Rose adds that the U.K.,
Germany and Western Europe, the U.S., Canada and Mexico boast some of the
largest GDP markets in the world, and global trade has not seized up – nor will
it.
“North America has been
the preferred destination for global capital, and will continue to be in 2017,”
he notes. “Additionally, investors in this region are beginning to harvest
gains, creating a ‘wall of capital’ to take advantage of any dislocations in
the marketplace.
“This wall is one of the
reasons we are predicting that North American global investors will have the
U.K. and, specifically, London in their sights in 2017. We believe that
well-timed portfolio acquisitions could produce significant returns.”
For a
complete copy of the company’s news release, please contact:
Sherry Quan
604.647.5098 or
604.726.0959 cell
email: sherry.quan@avisonyoung.com
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