|Avison Young: Stability and Opportunity in 2013 |
Stability and opportunity will drive Canada's commercial real estate markets in 2013, while many U.S. markets offer a balance of risk and opportunity, reported brokerage Avison Young, Toronto, Ontario.
“The Canadian lending landscape will not vary significantly in 2013,” said Norman Arychuk, mortgage broker with Avison Young’s Debt Capital Markets Group. “In the U.S., there will be somewhat greater moderation on almost all levels for higher-quality real estate seeking debt.”
Canadian institutional lenders “harvested a bumper crop of opportunities” last year, Arychuk said, “while non-institutional lenders probably had their most successful year ever…Good-quality assets with solid sponsors, supported by a positive operating history, have found good access to the institutional debt markets on a competitive basis.”
U.S. lenders reacted in much the same way as their Canadian peers, “only much more magnified when it came to moving up the risk ladder,” Arychuk said. “Perceived or unquantifiable risk attached to real estate has caused U.S. lenders to remain cautious, offer low leverages or, in some cases, simply not participate.”
“The real estate markets survived the ambiguity of the [U.S.] election year with continued modest growth in most sectors and markets [in which Avison Young operates], although there continued to be some fluctuations in values,” said Earl Webb, Avison Young’s president of U.S. operations. “Cap rates across all property types remained low relative to historical norms, especially in the [apartment] sector. Absorption rates in most major office markets were modest, as corporate and governmental occupiers remained very cautious on making major capital and personnel moves in light of the November election and the looming fiscal cliff.”
The major coastal markets saw the most capital interest and transaction volume in 2012, Webb said, “leaving the larger interior markets lagging.” He said opportunities exist for investors willing to differentiate their investment strategy and evaluate non-coastal markets, where cap-rate premiums range between 100 and 200 basis points.
Without a successful long-term resolution to the U.S. fiscal cliff issues, American markets will face continued sluggish occupancy demand at best and a possible recession at worst, Webb said. “Without sustained job growth, the U.S. will not have a robust and sustained real estate market recovery.”
“The North American and world economies will face challenges in 2013, but if the pundits are correct, we will address these issues and move past stagnation and government paralysis and exit 2013 with more clarity and the momentum to invest and grow,” said Mark Rose, chairman and CEO of Avison Young.