The Canadian commercial real estate environment faces volatility with rising interest rates and a pull-back from foreign investors.
The latest RealPac/FPL Sentiment Survey for the first quarter of 2019 reflects the feelings of industry stakeholders in January and follows the slump in capital markets at the end of 2018 and rebound at the start of this year.
The report highlights the impact of government intervention in the real estate markets with rising rates together with stress tests for residential mortgages, provincial taxes to tackle money laundering, and other policies which is notes are “with good intentions, but not well thought out, which makes us nervous.”
Despite the challenges, there is still plenty of heat in the Canadian market, which is less exposed to some of the headwinds affecting US commercial real estate such as tax reforms and political wrangling.
Among Canadian CRE stakeholders, 44% believe conditions will be much the same in a year, 29% think they will be worse, and 27% think they will be better including 4% who expect them to be significantly so.
Among the hotspots, industrial across multiple markets, Toronto offices, and residential rentals.
And for equity capital, there is still money waiting for the right opportunities, although some investors are looking to international markets in the hope of higher returns.
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