Central bank’s rate hikes have yet to manifest, Stephen Poloz says

November 25th, 2022

What will the impact of the current interest rate hikes be?

Ephraim Vecina
CMP

Former BoC head outlines possibilities

The full impact of the central bank’s rate hikes have yet to manifest, Stephen Poloz says

The Bank of Canada’s interest rate hikes have yet to reveal their full impact on the financial system, and are likely to be “even more powerful” than expected, according to the central bank’s former governor Stephen Poloz.

In a speech at Western University’s Ivey Business School in Ottawa, Poloz said that the hikes might have a less than desirable interaction with mounting debt levels.

“I think that the actions that are being taken to get us there will turn out to be even more powerful than a lot of people think,” he said.

Read more: What happens to Canada’s inflation next?

Poloz is anticipating inflation to ease to around 4% amid growth deceleration in metrics like commodity prices. As of October, Canada’s annual inflation rate stood at 6.9%.

The central bank’s hikes, which began in earnest in March, are widely expected to have a chilling effect on the national economy – particularly since it has become especially sensitive to interest rate movements, Poloz said.

“Does anybody here think the sensitivity of the economy to interest rate movements is less today than it was five or 10 years ago?” he said. “I think it’s more sensitive today than it was before.”

When asked if the BoC’s hikes have become overkill, Poloz responded, “It’s impossible to say.

“It takes a long time to actually slow down and so you stand on the brake really hard. Well, then you’re going to cause an accident too.”

 

Copyright © 1996-2022 KM Business Information Canada Ltd.

2.29 acres industrial land in Surrey sells for $15.34 Million

November 25th, 2022

Port Kells 2.29-acre industrial site sells for $15.3 million

Western Investor Staff
Western Investor

Industrial land was listed as the market began to shift downward, agents say, which caused a mid-launch strategy adjustment to a successful sale at $6.7 million per acre in the Port Kells area of Surrey, B.C.

Frontline Real Estate Services, Langley, for Western Investor

 

Property type: Industrial land

Location: 10202 177A Street, Surrey, B.C.

Land size: 2.29 acres

Date of sale: October 6, 2022

Sale price: $15.34 million

Brokerage: Frontline Real Estate Services, Langley, B.C.

Brokers: Todd Bohn, Alex Girling and Braydon Hobbs

 

© 2022 Western Investor

GTA commercial real estate market slowed during Q3 2022 following a strong first half | Avison Young

November 25th, 2022

Avison Young highlights GTA commercial market’s Q3 performance

Ephraim Vecina
CMP

New report pinpoints market’s strengths and challenges

Deviations from market trends established earlier this year were observed

Activity in the Greater Toronto Area commercial real estate market slowed during Q3 2022 following a strong first half, according to Avison Young.

In its latest market report, Avison Young cited elevated interest rates and ongoing economic uncertainty as the main drivers of deceleration.

“Many of the transactions that closed during the third quarter were negotiated in earlier months, and the market is expected to undergo a period of adjustment as stakeholders seek a new equilibrium in the current economic landscape,” Avison Young said.

Industrial property continued to be the region’s top commercial asset class in terms of dollar volume, amounting to roughly $1.4 billion during the third quarter.

ICI land clocked in at $1.2 billion in investments during Q3, followed by multi-residential ($699 million), retail ($694 million), and office ($536 million) investment activity.

Read more: Avison Young: Office market dynamics have significantly evolved in the largest cities

“Through three quarters of the year, total investment volume of $18.5 billion already exceeds all previous full-year totals except 2021 ($23.5 billion),” Avison Young said.

“However, the decline in activity during the second half of the year indicates that result is unlikely to be repeated in 2022. Cap rates are still compressed by historical standards, but the GTA average for all asset classes increased 20 basis points (bps) quarter-over-quarter to 4.3% – the highest level since 2017.”

 

Copyright © 1996-2022 KM Business Information Canada Ltd.

CMAs set to make their return for 2023

November 25th, 2022

2023 Canadian Mortgage Awards building connections

Fergal McAlinden
CMP

Attending the prestigious gala event opens up a host of possibilities, 2022 winner says

The Canadian Mortgage Awards (CMAs) are set to make their return for 2023, with Toronto’s Westin Harbour Castle to host the prestigious awards gala on April 20.

Nominations are open until January 13 for the much-anticipated annual event, which will see mortgage professionals from across the country come together to raise a glass to the industry’s best and brightest.

After two years being staged virtually due to the COVID-19 pandemic, the CMAs made their triumphant return this year as an in-person event – and one of the winners from 2022 told Canadian Mortgage Professional that the value of a live ceremony couldn’t be emphasized enough.

“In person to me is always the way to go,” said Reaza Ali (pictured top), broker relations manager for Eastern Canada at Fisgard Asset Management and winner of the 2022 CIMBC Award for Lender BDM of the Year (Private Lending).

“Even prior to winning the award for the first time back in 2016 and then each year being the nominee, I found it a great opportunity to connect with people that you may not necessarily always have the opportunity to connect with.”

Opening up opportunities

Winning an award at the CMAs can also represent a significant career boost, Ali added, potentially opening up new doors in the industry and elevating a winner’s status with peers and colleagues.

As a networking event, meanwhile, the CMAs offer the chance to rub shoulders with counterparts and other industry figures, and lets mortgage professionals “have conversations with some other executives that you may not have had the opportunity to within other organizations,” Ali said. “In-person is a definite advantage for that.”

For winners, the moment of hearing their name called out in a venue packed full of industry peers is one that lives long in the memory. For Ali this year, it was a “true surprise,” he said, even despite having already been named an Excellence Awardee in 2016.

“I did not expect that this year,” he said. “We had quite a field of nominees, all well deserving. When they did call my name, I was very surprised and happy with that. Standing in front of everyone, they probably saw it on my face. I had a big smile the whole night.”

Winning a CMA is an affirmation of years of hard work that for Ali reflected the strong effort he had put into not only developing strong relationships with broker partners, but also industry partners for Fisgard.

 

There’s no secret recipe to actually win an award – but Ali pinpointed some of the things he had focused on this year, namely focusing on service levels and setting as high a standard as possible in that area of the business.

“We may never always be the best priced, or may not have all of the product suite that others may have in our niche areas,” he said. “But that relationship-building and top-of-mind service was critical. I found as the entrants into this industry and into our space of the industry escalated, the competition became that much greater.

“So to me, the service was critical to be able to maintain, and actually exceed, all the goals that we set for ourselves.”

How to get involved

Nominating for the leading independent awards program in the industry is straightforward and free. Just click here to select the category you wish to submit an entry for, and follow the directions to enter your details and those of your nominee with a brief reason of why the nominee deserves to be recognized in that category.

Award categories are divided into brokerage awards, lender awards, industry awards, and broker awards, with the latter series including the prestigious Broker of the Year (Regional) and overall Broker of the Year gongs.

Industry awards include the Service Provider of the Year, Woman of Distinction, Excellence in Philanthropy & Community Service, Mortgage Industry Employer of Choice, and Lifetime Achievement in the Mortgage Industry categories.

Excellence Awardees are set to be announced across CMP’s online channels in February, and final winners will be revealed at the celebratory awards show and profiled in CMP magazine.

Attending the prestigious gala event opens up a host of possibilities, 2022 winner says

Remember – you have until January 13 to get your nominations in for what promises to be one of the most unforgettable nights in the Canadian mortgage industry calendar in 2023.

 

Copyright © 1996-2022 KM Business Information Canada Ltd.

Canadian real estate prices are forecast to fall further, but pandemic-era gains won’t be wiped out

November 25th, 2022

Canadian Real Estate Prices To Fall 30%, Early Stages of Recession Are Here: Ox Econ

Daniel Wong
other

The outlook for Canadian real estate, and the economy in general, is looking a little less bright. Oxford Economics warned clients this week, that we’re already seeing the early stages of a recession. Higher rates to cool inflation are pushing home prices much lower and prolonging the downturn. High inflation also means a stimulus windfall is unlikely, since it would be counter-productive to cooling measures.
Canadian Real Estate Prices To Fall 30%, Most Gains To Be Wiped Out
Canadian real estate prices are forecast to fall further, but pandemic-era gains won’t be wiped out—though it will be close. The firm sees prices falling 30% from peak-to-trough, after rising more than 54% since March 2020. For those without a calculator handy, that would leave March buyers with roughly 2.3% compound annual growth rate (CAGR). Not exactly the windfall many believed they were blessed with, especially when soaring inflation is considered. 
Residential investment, the share of gross domestic product (GDP) from new real estate, is also seen falling. The segment dropped 10% from Q1 to Q3 this year, as interest rates increased. The firm sees a further 8% decline in the coming year, which isn’t too hard to see with slowing new construction sales. 
Canada’s Recession Will Be Longer But More Shallow Than Normal
Early signs of a recession have already appeared, and this coming recession is expected to be longer than usual. Falling residential investment and already skeptical businesses are seen limiting their investment in this downturn. The firm is forecasting a 2% decline in real GDP from Q4 2022 to Q3 2023. The impact won’t be equal, as you might have guessed.
“This is slightly longer but shallower than the average recession since 1970,” explained Tony Stillo, director of economics at the firm. “Canada’s highly indebted households and still overvalued housing will likely be hardest hit.” 
Major Stimulus Unlikely & Counterproductive 
Expecting this recession to be a stimulus windfall? Don’t count on it, suggests Stillo. The recession won’t be particularly bad, and pre-planned infrastructure projects will help cushion the downturn. However, high inflation has become a limiting factor.  
“To avoid undermining the Bank of Canada’s efforts to tame inflation, major new fiscal stimulus is unlikely unless the recession is severe,” said Stillo.

COPYRIGHT © 2022 BETTER DWELLING

Canadian sees their finances hit by so-called unconscious spending habits amid the current cost-of-living crisis

November 24th, 2022

What’s plaguing Canadians?

Fergal McAlinden
CMP

New survey sheds light
Canadians are seeing their finances hit by so-called unconscious spending habits amid the current cost-of-living crisis, report says
As mortgage rates continue to rise and Canada’s cost-of-living crisis shows little sign of slowing, many borrowers have felt the pinch throughout this year – but a new survey has shone a light on some of the worrying spending habits that are still prevailing across the country.
According to a report conducted by FP Canada among online Angus Reid Forum members, many Canadians’ finances are being negatively impacted by unconscious spending, purchases made through habit or convenience which hinder longer-term financial plans and household budgets.
While more than half of Canadians (51%) are currently concerned about their financial situation, many continue with habits that the report indicated were examples of unconscious spending: 21% are charging monthly subscriptions to credit cards more often than less (14%), and over a quarter (28%) are using a credit card to make payments more often, compared with 13% less often.
That’s a worrying trend, according to Raymond James Ltd. financial advisor Johanne Plamondon, who said the survey reinforced the value of using an experienced advisor to get spending habits and financial discipline under control.
“Where it mentioned people are worried about their spending, but they’re not doing anything about it – that rings out to me,” she told Canadian Mortgage Professional. “That’s where having accountability to someone is important, whether it’s your partner or you reach out to an advisor to sit down and go through some of your cashflow – where it is going, and just being aware of it.
“It’s a lot of work to do it [and] people don’t want to spend the time to do it. For some of my clients that have been in a situation where they’re high in debt, we sat down and we’ve gone through and I’ve helped them do the hard work of going through those statements and combing through and itemizing each category.”
What mortgage professionals need to know
Making sure that clients are taking a responsible approach to their finances is critical for a mortgage professional, Plamondon pointed out, in an uncertain climate where both interest rates and other costs are concerned.
“From a mortgage professional standpoint working with people, what I want to do is make sure that a client is prepared and organized and ready to take on a mortgage so that when they do walk in that door, they’re able to be approved a lot more readily,” she said.
A quarter of Canadians are buying more than intended during sales more frequently than six months ago, according to the survey, while 53% are still picking up additional items at in-store or online checkouts at about the same level as they did earlier in the year.
Plamondon said it was essential for Canadians to ensure they’re consistently reviewing their financial statements, receipts and banking transactions to remain cognizant of what they’ve been spending and how much inflation and rate hikes are impacting their finances and savings.
“We don’t want to take away people’s fun, but a lot of things are automated. You might have two or three different streaming devices or club memberships, but the fees have gone up – and unless you’re aware of that, is that something you’re prepared to undertake?
“A lot of it is just spending creep, we’re not aware of it, so for my clients we have the conversation. This is the reality for everyone.”

How can Canadians curb unconscious spending habits?
Using cash more often or having cash envelopes at home to budget for groceries, gas, and other necessities could be ways that Canadians might mitigate their unconscious spending habits, Plamondon suggested, to ensure that they’re not using their bank card and racking up unplanned or unnecessary expenses.
Younger Canadians (aged 18-34) were more likely to say that their use of credit cards to make payments had increased compared with six months ago, with that cohort also charging monthly subscriptions to credit cards, buying more than intended during sales, and using “buy now, pay later” plans more often.
“I find that the older demographic tend to have a little bit more of a handle on it, but some people that are spenders are just falling right into that cycle of increasing expenses just because they’re not paying attention to what’s happening,” Plamondon said.
“The survey indicated that more than half of Canadians are starting to become concerned about finances, just basic food and rent and living is starting to become a little bit more challenging. That is where they need to reach out and get some help, whether it’s a family member or talking to an advisor.”

Copyright © 1996-2022 KM Business Information Canada Ltd.

0.87 acres multi-family rental in Kitsilano sells for $35.25 Million

November 24th, 2022

Kitsilano 74-unit rental building sells for $35.25 million

Western Investor Staff
Western Investor

The updated, well maintained 56-year multi-family property is close to Vancouver’s Kits Beach on a 0.87-acre lot.

Goodman Commercial, Vancouver, for Western Investor

 

Property type: Multi-family rental

Location: 2055 York Avenue, Vancouver

Number of units: 74

Property size: 48,128 square feet (rentable)

Land size: 38,312 square feet

Land size in acres: 0.87 acres

Zoning: RM-4

Sale price: $35.25 million

Brokerage: Goodman Commercial, Vancouver.

Brokers: Mark Goodman, Cynthia Jagger

 

© 2022 Western Investor

Canadians believe that a recession is looming just beyond the horizon

November 24th, 2022

How many Canadians are bracing for a recession?

Ephraim Vecina
CMP

Recession fears are revealed

More than half of Canadians are anticipating any such recession to last at least a year

A significant share of Canadians now believe that a recession is looming just beyond the horizon, according to a bi-annual report released earlier this week by Manulife Financial Corporation.

The majority (87%) of the respondents in the latest Manulife Bank of Canada Debt Survey indicated a belief that the economy will soon enter a recession or is already in one. More than half (56%) are bracing for such a recession to last at least a year.

Approximately three out of five Canadians (62%) also said that they don’t feel financially prepared for a recession, while nearly all respondents admitted to harbouring anxieties about interest rates (85%) and inflation (94%).

“As the economic landscape is looking rocky, a large majority of Canadians are getting worried and that’s particularly telling when reviewing [these] results,” said Lysa Fitzgerald, vice president of sales at Manulife Bank.

Read more: What happens to Canada’s inflation next?

Canadians who are preparing themselves for the recession said that they are planning to spend less on leisure or entertainment (53%), shop with a limited budget (52%), avoid making major purchases or conducting home renovations (49%), drive less (38%), or delay/cancel travel plans (33%).

Only 8% of respondents said that they’re adjusting their financial plans, while 5% are adjusting their debt

repayment plans.

 

Copyright © 1996-2022 KM Business Information Canada Ltd.

Cap rates across office, industrial and retail properties inched up in the Q3 | CBRE

November 24th, 2022

Rising cap rates linked to strong cash flows, not weak demand

Peter Mitham
Western Investor

Income-producing properties are providing a hedge against rising costs

Cap rates on rising in B.C. but solid cash flows are so far supporting asset values.Chung Chow/Business in Vancouver

Rising cap rates point to the importance of cash flows in the current investment market, complicating what’s being described as a “price discovery” phase as interest rates keep rising.

During heated markets, demand drives prices higher and cap rates lower as capital flows in.

But in the current environment, where recovering occupancies was followed by rising costs, lease rates have moved higher even as assets stopped trading. This has refocused attention on cash flow as a key measure of value.

“Over the past few years where we’ve had that cap rate compression, a lot of that total return has been driven by the value increases and not so much from the cash flow,” Jaclyn O’Neill, principal, investments, with BentallGreenOak told the Vancouver Real Estate Strategy & Leasing Conference on November 3. “Now we’re undoubtedly seeing some cap rate decompression, so there’s certainly some headwinds there, so the focus for us definitely is on cash flow.”

According to CBRE Ltd., cap rates across office, industrial and retail properties inched up in the third quarter. Residential and hotel properties saw minimal change, but upward pressure is building.

The income-producing potential of a property is critical both to meet costs and support valuations. Any decline in annual income suggests a weaker property, making strong, dependable tenants key.

With topline vacancies rising and a greater volume of sublease space shifting the market in favour of tenants, seasoned leasing broker Jeff Rank, senior vice-president, leasing, for British Columbia with QuadReal Property Group, said owners will be more likely to offer inducements to tenants rather than compromise on face rates.

“Most of the institutions are going to be in a position and in a defensive mode to keep their valuations up and will be prepared to give away more on the inducement side to make deals happen,” he said. “We’re not seeing a $50 rent turn into a $40 rent.”

CBRE data indicate that A-class lease rates held steady in the first nine months of the year at between $46 and $47 a square foot downtown, and inched up from $28.61 to $29.54 a square foot in suburban markets.

The emphasis on cash flow was recurring theme for speakers at the Western Canada Lodging Conference in Vancouver at the end of October. Hotels are operating assets whose worth is measured by cash flow in any market, and the current relationship between cash flow and asset values was reason for optimism.

“We’re certainly starting to see upward pressure on cap rates, but it’s not really directly related to the hike in interest rates,” Cindy Schoenauer, vice-president, hospitality and gaming with Cushman & Wakefield, said. “It’s more related to the rapid [average daily rate] growth that we’ve seen year to date.”

Vancouver’s average daily room rates increased 49 per cent last year, according to HVS Canada, outpacing the national growth rate of 34 percent.

The cash made for better performance relative to asset values, which largely held steady.

“It’s not that values are going down at this point in time, it’s more that they’re being offset by ADR growth,” Schoenauer explained.

Cap rate increases typically follow interest rates higher, HVS Canada senior managing partner Carrie Russell said. But similar to offices, the current shift is unusual given the strong growth in property income.

“Cap rates have to go up in an increasing interest rate environment, but currently income growth has been able to keep pace with that,” she said, noting that rising cap rates don’t signal distress as the hotel sector recovers. “The only distress that’s out there is distress that was pre-COVID and got pushed to the side while there was a public health crisis.”

This has made hotels, and other real estate assets with strong cash flow, attractive to investors.

“It’s an industry that’s a hedge against inflation,” Ed Kehdiguian, senior vice-president, CCWB Franchise Finance told the lodging conference. “The positive tailwind to that will eventually lead to some liquidity returning to the market.”

It’s a similar story in other segments of the commercial real estate sector, at least in Vancouver, where the perennial shortage of purchase opportunities will remain acute as buyers hold on to income-producing properties in an environment where cash is king.

Rank sees investor demand remaining strong despite a drop in deal-making in the second half of the year.

“Be very opportunistic on the acquisition side, because given the nature of our owners here, they’re staying where they were,” he told the leasing conference. “It’s going to be awhile, I think, before you see a crack in the armour on the acquisition side for the Vancouver market.”

 

© 2022 Western Investor

Tech tenants are responsible for 81% of all subleases available on the market in downtown Vancouver

November 23rd, 2022

Tech firms leasing office space in the suburbs

Tyler Orton
Western Investor

Some tech companies are taking a cue from their work-from-home staff and switching downtown costs for the savings and flexibility on the edge of town

Work-from-home is a stubborn trend that’s left downtown Vancouver in a “state of flux” after the pandemic rapidly shifted employee and employer expectations for the workplace, according to a new report from Avison Young (Canada) Inc.

The real estate services firm says the flight of tech companies from physical offices means the industry is responsible for 388,000 square feet, or 81 per cent, of all space available to sublease in downtown Vancouver. All other industries trail the tech sector by extraordinary margins with engineering coming up next at six per cent followed by mining at five per cent.

Avison Young found that small and medium-sized firms are now prioritizing operating cost-savings over the benefits of holding an office space. 

But larger tech tenants have the financial backing to maintain their downtown offices while also introducing working from home arrangements, according to the report.

There’s also the cold reality of the types of leases these larger tech firms have signed. The Avison Young report found many of these leases within newly built buildings are too long and too expensive to be taken up by other firms that can’t match those financial commitments.

“For industries like tech, it makes sense to work from home. Those companies that have gone 100 per cent remote and committed to that, what they’re doing now is they’re starting to hire across time zones and that’s really supporting their business,” Shauna Moran, founder and managing director of Operate Remote Coaching Ltd., told BIV.

Her Vancouver-based firm specializes in helping corporate leaders manage their remote and hybrid teams.

“Most people want some level of flexibility. They don’t want to have to commute, especially if they’ve moved out of cities over the last few years,” Moran said.

The Avison Young report found some larger tech companies like Electronic Arts Inc. and SkyBox Studios, the latter of which is owned by Microsoft Corp. have been expanding in Burnaby.

“Notwithstanding this renewed interest in the suburbs, many larger technology tenants are also continuing, and in some cases growing, their presence within downtown,” the report stated, noting Amazon.com Inc. is due to occupy another 1.1 million square feet of office space at The Post building on 349 West Georgia Street beginning next year and Microsoft will be expanding by 400,000 square feet at the B6 building at 1090 East Pender Street in 2023.

But Amazon began laying off thousands of employees across its global workforce last week, including some in Vancouver, and CEO Andy Jassy has warned more cuts were coming in 2023.

Facebook’s parent company, Meta Platforms Inc. occupies 34,000 square feet of downtown office space at Waterfront Centre at 200 Burrard St. The tech giant has also been laying off workers across the globe by the thousands this month.

“Only time will tell whether the larger technology tenants, who are increasingly reducing their expenses, will also attempt to sublease their spaces or instead decide to remain committed to the [central business district],” the report stated.

Downtown Vancouver is experiencing just 43 per cent of the visits it had prior to the pandemic, according to a July report released by the University of California, Berkley’s Institute of Governmental Studies.

That level of activity was low enough to rank it No. 57 out of the 62 North American downtowns examined.

Researchers used cellphone pings from 18 million smartphones across the continent between March 2020 and May 2022 to measure how much activity was returning to urban centres.

Downtown Van, formerly the Downtown Vancouver Business Improvement Association, has also used cellphone data to measure downtown activity. President and CEO Nolan Marshall III said this type of data can have significant limitations when comparing American and Canadian cities, owing to the latter’s stricter privacy laws.

“My experience talking to colleagues, my experience visiting other places, just runs completely counter to where I think that report ultimately had Vancouver ranked,” he told BIV in August.

Marshall said problems also arise depending on how one defines a visitor when using cellphone data to judge how active an area is.

Vancouver’s downtown peninsula is one of the most densely populated areas in Canada and the U.S.

“If you draw your data collection map across the entire downtown, you’re not identifying people who live within the area as a visitor,” Marshall said, “which is why we only do our cellphone data collection around our retail districts, and specifically so we can track how many people are going into those retail districts since they don’t have as many residents as the rest of downtown.”

 

© 2022 Western Investor