Keynote Address – Economic Overview: The Outlook for the U.S. and Canada
Derek Burleton, Vice President and Deputy Chief Economist (Canada), TD Bank Financial Group
Derek Burleton set the table for the more specific real estate focus of the Forum by providing an overview of global economic conditions and an outlook for local markets. Generally, TD sees moderate growth for the Canadian economy but with a number of “black swans” causing unease.
The first of these risks is inflation. This is mostly an issue in emerging markets, where rising food costs have a greater proportional impact, but central banks in Brazil, India and China have taken strong monetary action, raising interest rates and curbing inflation relatively effectively. Developed economies are not experiencing significant general price increases – except with respect to oil.
Risk #2 is oil. Uncertainty in the Middle East has added a large risk premium to the price of oil, taking it well over a $100 per barrel. While the “disaster scenario” of political turmoil causing supply disruption in Saudi Arabia remains a possibility, TD is forecasting price settling to a base of $90 to $95 per barrel for the next couple of years.
The third risk comes in the form of surging government debt, most immediately in the peripheral economies of Europe. Interestingly, Mr. Burleton believes the more dire situation in other countries buys the US some time to deal with its situation. Despite a “wobbly” housing market, the American economy is otherwise recovering nicely with growing profits, productivity and employment.
Bearing those risks in mind, TD predicts Canadian GDP growth of nearly 3% in 2011 and closer to 2.5% in 2012, interest rates rising steadily at .25% per quarter starting in June through 2012 (a faster ascent than in the US), our dollar falling by the end of next year to around US$0.95 as commodity prices start to level off, inflation steady within a band around 2% and consumer spending being moderated by increasing household debt levels. On a regional basis, the prairie provinces will experience by far the strongest growth, with BC’s performance less robust than in our Olympic year, at around 2.3% to 2.6% growth.
U.S. and Canadian Real Estate: Where is Smart Capital Going in an Improving Economic Environment? Where are the Best Opportunities? Is Vancouver Still Attractive?
John O’Bryan, Vice Chairman, CB Richard Ellis Limited
Armin Martens, President & CEO, Artis REIT
Darren Tangen, CFO, Colony Financial and Principal, Colony Capital, LLC
Michael Turner, Senior Vice President, Investments, Oxford Properties
Richard Weir, Vice President, Bosa Development Corporation
The esteemed and diverse (in terms of market sector) panel discussed the economic environment and real estate markets in Canada and the US. While each of the members of the panel had positive comments on the Canadian real estate market generally and the Vancouver real estate market specifically, geographic diversity and opportunities in the US were common themes among the experts.
Notwithstanding Darren Tangen’s cautions that the US Market is a different risk environment than Canada and continues to be uncertain, each of the other panelist agreed that there are opportunities in the US real estate markets in their various sectors. While typically US real estate is more expensive than Canadian real estate, that is generally not the case right now and Armin Martens, of Artis REIT, is not sure how long this window of opportunity will last.
While not typically a seller, according to Richard Weir, Bosa Development Corporation made a strategic decision to sell revenue producing property in 2010 for the purpose of reallocating capital from the Canadian to US real estate markets. Although the lending market for construction financing is tougher in the US, Mr. Weir foresees very little competition in this multi family residential real estate market in the foreseeable future. Mr. Weir believes that the tougher lending requirements, including higher equity requirements than in Canada, will suppress supply in the multi family sector in the US. Bosa Development Corporation currently has projects, at various stages, in Seattle, San Francisco, San Diego and Orange County.
Mr. Tangen agreed with Mr. Weir’s sentiments that the multi family sector (as well as the hotel sectors) are rebounding in the US real estate market but cautioned that office, retail and industrial sectors remain weak in the US.
Legendary Series: A Panel of Legendary Players in the Vancouver Market
Bob Rennie, President, Rennie Marketing Systems
Michael Audain, Chairman, Polygon Homes Ltd.
Robert H. Lee, Founder & Chairman, Prospero International Realty Inc.
David Podmore, Chairman & CEO, Concert Properties Ltd.
Bob Rennie commenced by focusing on their wide-ranging philanthropy and community involvement. Each of the panellists noted that the ethic of community involvement had been instilled in them in their youth and that, as they had enjoyed much success in Vancouver, they felt it important to give back to the community. Bob Lee spoke of the new downtown Vancouver YMCA, Michael Audain of the importance of the proposed new Vancouver Art Gallery and David Podmore of his involvement with the Vancouver Olympic bid and BC Pavillion Corporation. All three commented on their motivation to make Vancouver a better place for their children and grandchildren.
The three panellists then touched on the event or events that had provided the impetus for their career success. Mr. Lee and Mr. Podmore each mentioned having an unexpected opportunity presented to them, and having to act on that opportunity relatively quickly. Mr. Podmore noted that when the opportunity came, he acted on his first impression and did not bog down in analysis.
In response to Mr. Rennie’s question regarding a “negative game changing” event in his career, Michael Audain described an event in which Polygon, choosing the lowest bid, engaged a consultant whom they had never used and had not previously worked with on a project in British Columbia, resulting in significant problems with their building. Mr. Audain noted the lesson that the least expensive bid does not always turn out that way, and the importance of working within your key relationships.
In response to the same question, Mr. Lee described a transaction which led him to guiding principles such as “don’t overleverage”, “avoid personal guarantees” and “don’t be afraid to take smaller pieces of more, bigger deals”. Mr. Podmore’s response involved an incident which taught him “don’t take anything for granted” in your plans, proposals and projects.
Regarding the lessons taken from the recent economic downturn, Messrs. Audain and Podmore both noted that they are very bullish on the future of British Columbia and Vancouver, but that governments must commit to vital infrastructure projects, particularly outside of the South Coast, including pipelines, ports and dams. With respect to the upcoming HST referendum, all three panellists agreed that the provincial government needs to do a better job of communicating its position if it hopes to uphold the HST.
In thanking the panel, Bob Rennie noted that the dedication to their profession, community work and extensive philanthropy of these three legends are indicative of what makes up the fabric of Vancouver.
The Race is On – Who Will Build the Next Office Building?
Bart Corbett, Senior Vice President, Cushman & Wakefield Ltd.
Tony Astles, Executive Vice President, Bentall LP
David Routledge, Vice President, Real Estate Management West, Oxford Properties Group Inc.
David Negrin, President, Aquilini Development & Construction Inc.
Jon Stovell, President, Reliance Properties Ltd.
Moderator Bart Corbett introduced this session by giving a perspective on construction completion, vacancy and absorption rates for office buildings in the last 20 years in Montreal, Toronto, Calgary and Vancouver. In comparison to the other three cities, Vancouver’s absorption is significantly lower, it has the lowest vacancy rate in the country at 3.9% but has seen very little new construction over the last 20 years.
Mr. Corbett then opened the discussion by asking if there really is a race to build the next office building in Vancouver. None of the panel members thought that there is such a race. David Routledge believes each potential building has a niche of its own and therefore does not the impact other buildings. David Negrin felt that an obstacle to increasing the pace at which office buildings are being developed is Vancouver’s frustrating and lengthy rezoning process. Tony Astels agreed that the long process and amount of coordination required means greater risk overall.
When asked if the City’s design for more office space in the downtown core has impacted overall development design Jon Stovell pointed out that the city requires a five to seven storey podium for the taller buildings. This then opens up opportunities as the lower floors, having lower values generally, are more suitable to office space.
The panel also touched on speculative office developments in Vancouver. Mr. Routledge felt that this could happen but only on a scale appropriate for Vancouver as a branch office city. Messrs. Negrin and Stovell disagreed with him, believing that pre-sales and pre-leasing are necessary. With respect to investors buying existing product as opposed to developments, Mr. Astels believes most investors find the development side too risky.
Asked by Mr. Corbett if the gap in rent between the downtown core and the suburban markets was a concern for him, Mr. Astels answered in the negative and pointed to a few reasons. First, Vancouver is a very fractured city making it difficult to get around. Second, because Vancouver is a small tenant city we do not experience the substitutions seen in head office cities. Finally, companies do not necessarily focus on real estate itself but focus more on where their business needs to be strategically to operate and grow.
Land & Development Activity in Vancouver: How Much is Being Driven by Mixed Use Development vs. Traditional Activity?
Sandra Cawley, Principal, Burgess Cawley Sullivan & Associates
Phil Christie, Vice President, Real Estate, TransLink
John Conicella, Vice President, Development Strategy and Business Development, Wesgroup Properties
Michael Geller, B. Arch, MAIBC, FCIP, The Geller Group
Stephen Knight, President, Sitings Realty Group Ltd.
In looking at the complexities and challenges of developing mixed use space, John Conicella talked about Wesgroup’s development known as The Brewery District. After acquiring the lands in 2005, the primary challenge for Wesgroup was getting the M1 Light Industrial lands rezoned. The developer also faced three other major hurdles: (1) convincing the City of New Westminster and the community that big changes were necessary; (2) understanding the specific needs of the City and the community (the City was concerned about employment and health care and the community wanted to maintain its unique history and regain a sense of community); and (3) they were developing a triangular site with a 35 foot drop and a major arterial road cutting through the lands. After a long public consultation process working with the City and the community, the developer ultimately got 1.395 million square feet on their 9 acre site and the permitted land use includes everything under the sun, from residential to office to hotel to health care. It was crucial for the developer that the development include employment, and the developer ended up with a 30,000 s.f. Thrifty’s, 60,000 s.f. of medical and 150,000 s.f. of office that will be used for the TransLink head office and Transit Police facility.
Stephen Knight commented on what is driving development activity in Vancouver and noted that with the North Shore mountains, the Pacific Ocean, the U.S. Border and the ALR, developments can only go up. Mr. Knight then pointed to Central City and Metropolis at Metrotown and observed that we are on the cutting edge in terms of mixed use developments. In Mr. Knight’s opinion, the biggest issue with mixed use developments is the time it takes to complete the development, noting that Plaza 88 in New Westminster was started in 2000 and is now being completed 11 years later.
According to Michael Geller, the future of development is mixed use. One of the major advantages of mixed use development is that developers do not need to provide as much parking as previously required. Conversely, one of the major disadvantages is that zoning likely does not contemplate the development you want, and many municipalities currently have trouble writing comprehensive development bylaws. Mr. Geller also discussed transit oriented developments, advising that one of the problems associated with such developments is the uncertainty of developing the lands around transit stations. Developers often have to rezone lands in such cases and do not know what density the public will support.
Phil Christie spoke about TransLink’s role in land and development activity in Vancouver and advised that while TransLink is not a developer, TransLink is a driving force behind development and annual growth in assessed land values. Mr. Christie commented that it is virtually impossible to rezone single family zones along current transit lines, pointing to the old Expo Line as a prime example. Instead of looking at these old lines, Mr. Christie advised that TransLink can influence the location of new transit lines making sure the new lines are located in the right location, they can speak to municipalities early in the development process and can help give a product to developers that has more certainty. Mr. Christie commented that he would like to see more involvement from developers and the real estate community in moving transit oriented developments along, perhaps having developers build the transit stations with TransLink simply running the line.
Kelowna, Whistler, Victoria and Other Secondary Markets: Who is Buying and Who is Selling?
Bob Tattle, Vice President, Business Development, Anthem Properties
Bob Glass, Partner, MacDonald Development Corp.
Ward McAllister, President & CEO, Ledingham McAllister Properties Ltd.
Drew Meridith, Whistler Real Estate Co. Ltd.
Michel Tremblay, Managing Broker, Okanagan & Revelstoke, Sotheby’s International Realty Canada
Andrew Turner, President, Invermay Real Estate Advisors
Ward McAllister noted that the key economic driver for British Columbia is consumer confidence. Immigration is the engine behind the Vancouver market, 90% of which is coming from Asian countries. Kelowna, Victoria, and Nanaimo will all see the rippling benefits of that – but there is still inventory to be absorbed in those markets. Mr. McAllister cautioned that right now is the lynchpin time for buying discounted real estate, both within B.C. and in the U.S., and that in 12 months’ time, the market will be much different.
Speaking on the current market in Whistler, Drew Meridith candidly noted that the Olympics have not produced a noticeable change, and that international customers are not currently coming to Whistler. In addition, the top of the Resort Municipality of Whistler’s cap on development has been reached, and it doesn’t appear as though there any lands left to meet the difficult bar RMOW has set for development. While redevelopment should now be coming into play, RMOW will not allow for increases to density. However, investors should be happy with the cap on development, provided they stay within Whistler’s core ski-in/ski-out areas and do not purchase on the periphery.
“Flat as a pancake” is how Bob Glass describes the current resort market in Kelowna. Mr. Glass attributes the stagnant resort market to the fact that buyers from Alberta stopped looking at Kelowna in late 2007 and early 2008, and are now looking at places like Phoenix and Scottsdale for their secondary homes. While there are some signs of renewed interest at present, it will not be until the market in the U.S. starts to heat up again that Kelowna will see a surge of buyers. In addition, when Kelowna’s market improves, buyers will likely be interested in neighbourhood communities rather than resort projects. Michel Tremblay noted that the $550,000 to $650,000 price point seems to be the “sweet spot” in Kelowna right now. The panel generally agreed that lakefront property in Kelowna seems to be exempt from any price reductions felt in the larger community.
While Victoria has been relatively stable, Andrew Turner observed that vacancy rates in its office market have risen dramatically and are currently just under 10%. Mr. Turner noted with some concern Morguard’s Uptown development, which will provide a significant amount of retail space to the market. With respect to the residential market, Mr. Turner acknowledged that while there have been some notable foreclosures, many projects were over-planned rather than over-built. Many people are moving to smaller more affordable units, and the people currently driving Victoria’s residential market are “the newlyweds and the nearly dead.” Victoria has not seen the same levels of growth through migration experienced in the Lower Mainland.
Multi-Unit Residential Market: Where are the Values and Where are the Opportunities?
Cameron Muir, Chief Economist, BC Real Estate Association
Ralph Archibald, Senior Vice President, Polygon Homes Ltd.
John Lynch, Manager, Business Development, Canada Mortgage & Housing Corporation
Chris Philps, President, Fairborne Homes Ltd.
Jennifer Podmore Russell, Real Estate Advisory Leader, Deloitte
With the average price for residential real estate increasing 20% year over year in Vancouver, moderator Cameron Muir asked the panel to explain the phenomenon behind this constant increase. Ralph Archibald attributes the increase to the Asian buyer, who is not only buying in Richmond and Vancouver’s West side, but is also now active in South Surrey and Delta. In addition, despite recent changes to mortgage regulations, consumer confidence has remained quite high. Both Chris Philps and Jennifer Podmore Russell agree with Mr. Archibald that the Asian market is deep and can be viewed as a long-term trend. In addition, Ms. Podmore Russell noted that regulations on property transfer taxes in China have resulted in increased money coming into Vancouver. Mr. Philps observed that the Asian buyer is both the Lower Mainland’s biggest opportunity and its biggest risk. In terms of strategies for dealing with this increase in price, Mr. Archibald noted much effort is being placed in designing smaller, more efficient, and more affordable units.
In terms of what first-time home buyers, Mr. Archibald noted that these purchasers tend to be in the buying cycle longer, but do eventually make decisions to go forward. Ms. Podmore Russell observed that first-time home buyers have been priced out of certain markets, like Vancouver, for years, but where the price point works, for example in New Westminster, then you see action from them.
In contrast to the market several years ago, Mr. Philps noted that today’s home buyer is much smarter, and is now considering location before making a purchase. Ms. Podmore Russell observed that developers are also much more deliberate in the current market, and gone is the race to market projects. Mr. Archibald noted that, while there may be fewer units being built in developments, the overall number of projects has been consistent, and consumers don’t notice the decrease in production as a result.
In terms of the impact of HST on the current marketplace, Mr. Archibald believes that his biggest challenge remains in educating the public and realtors alike that HST does not amount to an increase of 12% to the purchase price of property. Mr. Philps commented that purchasers seem to be focusing on HST less, and the benefits of the policy are starting to trickle through in supply. Ms. Podmore Russell does not see HST as really impacting developers’ decisions on whether or not to go ahead with a project, and developers’ real issues with HST seem to be more centered on pricing strategies and whether to include it in the purchase price, as well as in expressing frustration with the level of education needed around it.
Mr. Philps is watching the Richmond, Burnaby, and North Vancouver markets closely, as these markets experience consistent demand due to the amenities they boast and the transportation structures in place for these cities. Mr. Philps is also watching Surrey closely because of the affordable homes it offers. Mr. Archibald noted that Asian buyers have been attracted to the quality of schools certain locations offer, prompting Mr. Archibald to watch both South Surrey and Langley closely.
Is the Consumer Back with a Vengance? How are U.S. Retailers Impacting the Vancouver Retail Scene?
Mark Startup, President & CEO, Shelfspace – The Association for Retail Entrepreneurs
Rick Amantea, Vice President, Park Royal Shopping Centre
Terese Cairns, Associate Vice President, CB Richard Ellis Ltd.
Scott Lee, Principal, Northwest Atlantic (Canada) Inc.
Darryl Schmidt, Vice President, National Leasing, Western Portfolio, The Cadillac Fairview Corporation Limited
Asked whether the consumer is back with a vengeance, Rick Amantea advised that the consumer never really left; instead, the consumer simply changed. According to Mr. Amantea, today’s consumer has changed because of the 2007 economic slowdown, but also because our population is aging, our ethnic diversity is increasing, families are getting smaller, and urban density is increasing with consumers shopping where they live. The 2011 consumer is smart, they know how much they are willing to pay, they research products and they hunt. The 2011 consumer wants quality over quantity, they realize that being fashionable is not just about fashion anymore and need a new iPad 2 or iPhone 4, and while they still buy luxury items they buy fewer expensive items and are willing to pair Chanel with GAP or Coach with Joe Fresh. Today’s consumer wants good value, high quality and excellent service, with the perception being that U.S. retailers can deliver on all three.
With respect to U.S. retailers coming to the Vancouver retail scene, Scott Lee cited four main reasons for their expansion into our marketplace: (1) with the U.S. economy starting to rebound, it is simply a capital allocation issue for the U.S. retailers; (2) a lack of retail competition north of the border, with U.S. retailers coming to Vancouver believing that we are “under-stored”; (3) U.S. retailers looking to us to fill their mandate for “international expansion”; and (4) in Canada, our top 5 enclosed mall owners own 68 of 100 enclosed malls, which means that in 5 meetings a U.S. retailer can gauge if their Canadian expansion plans will be successful or not.
Terese Cairns advised that U.S. retailers arriving on our retail scene are the three Fs – food, fashion and fancy. Ms. Cairns noted that we currently have anywhere from 5 to 6 tenants competing for the same retail space, with this increase in tenant depth meaning that consumers are finally seeing the retail diversity that we have always wanted in Vancouver. She also acknowledged that while U.S. retailers coming to Vancouver is good for landlords, it is bad for local retailers as they are suddenly competing for retail space and are either being pushed out or delayed in terms of their expansion.
From a landlord’s perspective, Darryl Schmidt commented that the market has never been stronger for enclosed mall owners, noting that Cadillac Fairview’s foot traffic and profitability in Vancouver were at all time highs while vacancy rates were at all time lows. Mr. Schmidt noted that currently a landlord’s greatest difficulty is keeping up with demand, crafting a tenant mix that is fresh and cutting edge and ensuring the best possible shopping experience for its customers. Mr. Schmidt also commented on lease negotiations with U.S. retailers, advising that U.S. retailers pay the same rental rates as local retailers; however, due to the recent economic slowdown in the United States, many U.S. retailers are adamant that they get a co-tenancy clause in their lease, with many U.S. retailers also looking for “brand exit strategies” allowing them to get out of their lease if their Canadian expansion plans fail.
How is the Brokerage Business Changing?
Remco Daal, President, Bentall Kennedy (Canada) LP
Ron Bagan, Managing Director, Colliers International
Mark Hannah, Managing Director, Avison Young Canada Inc.
Mark Renzoni, Managing Director, CB Richard Ellis Ltd.
Hendrik Zessel, Senior Managing Director, Cushman & Wakefield Ltd.
This panel representing Vancouver’s four largest brokerage houses discussed how the brokerage business is changing, how each of the panelists’ companies is managing these changes, and their thoughts on the industry’s future.
All panelists reported a strong start to 2011 and a positive outlook for the year ahead. Ron Bagan reported a resurgence in the land business, which he sees as very positive given his view that this has been one of the factors missing from a complete rebound from the recession. Mark Hannah said that a lack of quality supply to satisfy demand would be a concern in 2011 and predicted that leasing will pick up on the commercial and investment side in the year ahead. This contrasted slightly with Mark Renzoni’s view that leasing is still a little softer than expected.
In response to a question about how their firms’ clients are changing, Hendrik Zessel noted that many tenants are now national or even international players and that brokers continue to fill a role for these corporate clients by deciphering and filtering local market information. Mr. Hannah believes that landlords will continue to rely on the brokerage industry and expects to see more leases containing rents based on annual growth rather than the flat rent that has been typical over terms of leases. He also predicted that there will be an increasing emphasis on financial spreadsheets and reiterated his view that there is not enough quality product available for the appetites currently in the market. Mr. Bagan said that brokers need to understand the needs of their clients and to provide value through due diligence, market expertise, research and understanding of sustainability issues. Mr. Renzoni reported that the investor market continues to be a very strong segment, noting that private investors can move more quickly and take more risks than public or institutional clients. Mr. Bagan does not think that institutional foreign investors will play a major role in our market in the year ahead.
The panelists also discussed the influence of technology generally on the brokerage business. While each firm is stepping into the social media realm to some degree, the panelists agreed that the brokerage business will continue to be built on relationships and that social media will not be able to replace that. However, Mr. Renzoni did also note that technology may ultimately change some of the marketing strategies of the brokerages – with the advances in handheld communication devices, potential clients will appreciate more of a firm’s marketing materials being accessible by way of iPad, Playbook or other such products. He welcomed a potential associated reduction in marketing costs.
Moderator Remco Daal expressed a joking wish that the firms would start consolidating their research data sources, but the panel was fairly unanimous that such a move would not happen. Although Mr. Hannah agreed that having 4 separate databases of market information provided to potential clients seems wasteful, Mr. Renzoni reminded the attendees that in the past, the brokerages in Toronto had attempted unsuccessfully to harmonize and use one single database. He also noted that specialized research is core to what brokerages offer to their clients and that performing research and collating and analyzing the data is very good training for young people in the business.
Mr. Daal asked the panelists for their response to the view that brokers are not up to date enough on sustainability issues. The panelists reported that each of their firms is undertaking major internal education efforts on sustainability issues, and Mr. Bagan noted that many clients are starting to push for their brokers to have sustainability expertise. Mr. Hannah agreed that there are many companies now that want to deal with LEED certified brokers. Mr. Renzoni said that his view is that Vancouver is slightly behind Toronto on sustainability but that this will all change once new buildings are built in Vancouver because such buildings will be built to a sustainability standard that other buildings will have no choice but to catch up to.
The discussion ended with Mr. Daal asking each panelist to make one surprise prediction for 2011. Mark Renzoni predicted that the US recovery will be a pleasant surprise this year and will be especially beneficial for British Columbia’s retail leasing and other core markets. Mark Hannah predicted that 2011 will see hotels start to trade again after a long period of no movement in that sector. Ron Bagan said that the three major projects slated for downtown Vancouver will go ahead in 2011 and have a big impact on the market while Hendrik Zessel foresees a major US developer entering into the Vancouver market with a major project in 2011.
Branding Buildings Better: Social Media Impact
David Allison, Co-Founder & President, Braun/Allison Inc.
David Allison began this session be defining social media simply as an opportunity to make some friends and share some stories. According to Mr. Allison, social media has started a marketing revolution and it is no longer a question of whether you should get on board but how quickly you can.
Currently YouTube is the second most used search engine in the world after Google. Video has become the new text and has changed the way we communicate. Mr. Allison attributes the recession as being the catalyst for the following five things that are part of this marketing revolution:
- Requirement of authenticity. The truth in everything we do is now essential because of the million watchdogs online.
- Access to information. Google is in charge of the world. Studies show that 65-85% of home purchases start with a Google search.
- Demand for dialogue. People want to be able to have conversations with people, not be talked at.
- Less trust in traditional media. It still has a function but this has changed.
- Mainstreaming of social media.
According to Mr. Allison, marketing is now more about “marketing journalism”, you need to think like a reporter and cover all aspects of what you are marketing to provide the information people want. Mr. Allison outlined four things that you need to do in order to use social media effectively:
- Be ready to explain yourself: who you are and what your vision or strategy is.
- Define your audience with more precision that you have in the past.
- Tell big, deep and wide stories. Focus on macroeconomic trends, tell a story behind the features you are selling and think of all the needs of your audience and explain how you can fulfill those needs.
- Determine the personality of your brand and be consistent with it.
A company’s website is the most important tool in social media, this is where you get to tell your story. Following that is what Mr. Allison refers to as “hero medium” which are free things that you can offer your audience to help them such as books, lectures and instructional videos. Traditional media still does play a role as print advertisements are still the number one way for people to find out about a project in the first place. Traditional media uses the following six techniques which should also be used in social media:
- Plan your story lines in as much advance as you can.
- Use other peoples stories.
- Create your own stories.
- Select the best channels for your product.
- Be consistent in your output.
Mr. Allison concluded his session by making the following five predictions for the future of marketing communications:
- Advertising as we know it will be dead.
- The internet will still be around but we may not recognize it.
- As ideas of privacy continues to change, having access to social media channels will be important because of people volunteering personal information.
- Technologies will change.
- Branding will become more important than ever.
The Outlook for the Industrial Real Estate Market in the Years Ahead
Todd Yuen, Vice President, Industrial Development, The Beedie Group
Ron Emerson, President, Emerson Real Estate Group Inc.
Jarvis Rouillard, Director of Developments and Acquisitions, Tonko Realty Advisors Ltd.
Andrew Tong, Senior Vice President, Investments, Concert Properties Ltd.
Sean Ungemach, Senior Vice President, Industrial, Cushman & Wakefield Ltd.
The panel decided to focus less on current statistics for the sector, and more on topical issues.
First up was the concern that the Metro Vancouver market is undersupplied in land. That is true of all sectors, but has its own unique implications for industrial. Industrial uses take up substantial quantities of land, and vertical industrial buildings and mixed use projects are simply not viable. Frequent large truck traffic does not interface well with residential or commercial uses. Further, the industry is not like many other sectors (office etc) where business will buy in at downtown rates because that is where they have to be in the market. The fundamentals of an industrial site have to work, because many users will otherwise simply choose another location, such as Calgary. Low land availability and high land prices make for a challenging market.
Next up was a discussion of REITs. The panel commented that REITs have a Wall Street aspect. The panellists tended to love REITs when selling land to them, but felt quite differently when buying. REITs consider the Metro market a safe market in the bottom never drops out of it (1981 to 1986 was the last time there were sellers chasing buyers in a big way), although it is very expensive.
A third topic was the role of the Port, which is seen as the major driver of the sector going forward. The speakers noted that the Port has a vested interest in its business, and needs viable land for its clients. The land use regulation issues in the lower mainland, including but not limited to the ALR, have an impact on that, to the point that the Port bought ALR land at one point and got a lot of flack for it. That may not be in the cards again in the short term, but at the same time, it is important to the economy that the Port survive and thrive, and that will involve it in the need for additional land at some point. The Port has key implications across the board, including good technical jobs, and a good deal of spin off demand for private sector logistics sites.
Finally, there was a discussion of various government initiatives, with a negative view being expressed regarding the Regional Growth Strategy, as another layering on bureaucracy over and above the ALR. There were also various views expressed in connection with the Surrey City Development Corporation. One comment was that the industrial business was a very difficult one in which efficiencies were important, and that that lesson could be expected to play out with taxpayer dollars at risk. There also had to be concerns in connection with the conflict of interest that arises when a regulator competes with those it regulates, which could potentially play out by way of manipulating zoning etc.
Has the Apartment Market Out-Performed All Other Real Estate Asset Classes? Will this Continue to be the Story?
Derek Lobo, CEO, ROCK Apartment Advisors Inc.
This panel tackled some of the same issues that the apartment panel discussed in 2010, and unfortunately some of the same issues remain. The panelists agreed, in particular, that no new significant rental projects will come to market without some major change in government policy.
Phil Milroy commented that an investor in apartment product should generally have a diversified portfolio among the classes, although market fundamentals and understanding them are key to the performance of the assets generally. He noted that C and B products perform well in blue collar towns, whereas an A class product would not be as successful in that market and that the same may hold true in reverse. He also noted that area selection within a city is key and that the shorter the tenure of residents, the more important it is to have a conveniently located asset close to amenities and transit. Brian McCauley agreed that the location of an apartment building relative to its asset class and target market is key to ensuring performance of the asset.
On the topic of new apartment construction and why we still have not seen much action in this area in the Vancouver and surrounding market, Mr. McCauley noted that it is easier for larger, institutional investors to undertake new construction because they have longer horizons, can afford to be patient and practical and they generally intend and can afford to manage their assets for decades. Mr. Milroy noted that the challenges to increasing new apartment construction are different in different markets, noting as an example that while absorption may be a big issue in some markets, it is definitely not in others. He suggested that removing rent controls with respect to newly constructed apartment buildings would help players in this market control their costs and spread them out over time.
Asked what one piece of advice they would give an investor looking to get into the apartment sector, the panelists provided the following tidbits:
- Have patience – apartments are not an easy, quick flip play.
- Be well capitalized.
- Have a long term view/horizon.
- Be prepared to be hands on in the management of your asset.
- You must have a management platform. As an example, Phil Milroy only half-jokingly said that there is no better training than to get in your apartment building and clean your own ovens.
- Reduce your risks and borrow now while interest rates are low.
- Buy close to transit.
- Due diligence – take it seriously. Before buying, look at your list of long term tenants and walk those suites. This will give you an idea of what your long term capital expenditures exposure will be.
Final Comments on the Risks, Trends, Challenges, and Opportunities for the Next 12-24 Months
Gino Nonni, President, Wesgroup Properties
Avtar Bains, Executive Vice President, Colliers International
Andrew Bibby, President & CEO, Grosvenor Americas
Michael Cooper, Vice Chairman & CEO, Dundee Real Estate Management
Jon Love, Managing Partner, KingSett Capital
Gino Nonni concluded the day by leading an insightful overview from some of Canada’s leading real estate executives: Avtar Bains, Andrew Bibby, Michael Cooper and Jon Love. The panel told us what they expect in the next year or two. All were positive, although they acknowledged that Vancouver can be a challenging market, particularly with its constrained land base, limited supply of product and low cap rates. Having said that, there were some interesting contrasts in the observations: “The future does not look like the past.” (Michael Cooper). “The more it changes the more it stays the same”. (Avtar Bains). Jon Love observed that most major investors want assets in Vancouver; it is a major market and while the returns may be low, Vancouver assets can be justified by low risk, stability and the prospect of growth; he noted that one way of achieving success for KingSett is through development partnerships. Andrew Bibby noted that in the current market, skill and knowledge of the market is at a premium.
The biggest challenge may be the limited supply of product. As Michael Cooper noted, while Dundee has substantial assets in the Lower Mainland which have out-performed and Dundee desires to own more, it can be “hard to find the entry point”. According to Avtar Bains, when he started as a broker, he was happy to believe that almost any building in Vancouver was going to sell every 7 years. Now, getting a sale is like “pulling hen’s teeth”, with a small club of institutional owners dominating the Vancouver market; “People used to say, they’re not making land any more, so buy land; now in Vancouver they’re saying, they’re not making land anymore, so why sell?”.
Didn’t they say the same thing last year? Links to Feature Articles from past Vancouver Real Estate Forums: